Australian Dollar
While the Westpac consumer confidence index weakened further in June the ‘Aussie’ continued to benefit from market risk appetite on Wednesday. Solid Chinese data helped to shore up the appeal of commodities, encouraging investors to pile back into higher-yielding currencies. Signs of increased global demand also boosted copper prices, boding well for the outlook of the Australian economy thanks to its continued reliance on the mining sector.
However, the notoriously volatile Australian labour market data could put renewed pressure on the antipodean currency if employment is found to have weakened once again.
Sterling
Despite reports that the Conservatives and Democratic Unionist Party (DUP) are close to finalising a confidence and supply arrangement to prop up the minority government the Pound continued to struggle. This was due to disappointing average weekly earnings figures which added to evidence that real wage growth is still slowing. Coupled with Tuesday’s higher-than-forecast inflation data this fuelled concerns that consumers face a deepening squeeze on finances in the coming months, limiting spending and wider economic activity.
Unless the Bank of England (BoE) takes a significantly more optimistic view on monetary policy at its latest meeting GBP exchange rates are likely to remain biased to the downside in the near term.
Euro
A steady uptick in Eurozone employment failed to particularly bolster the appeal of the Euro, even as industrial production also showed improvement on the month. While the Eurozone economy continues to demonstrate signs of strength the less-than-hawkish outlook of the European Central Bank (ECB) is limiting the appetite of investors. Nerves over tonight’s Eurogroup meeting have also weighed on the single currency, with markets hoping to see the approval of the next tranche of Greek bailout funds.
If creditors ultimately fail to reach an agreement this could see the start of a fresh chapter in the Eurozone debt crisis, leaving the Euro vulnerable to an extended slump.
US Dollar
The appeal of the ‘Greenback’ weakened sharply in the wake of weaker-than-expected consumer price index and retail sales figures. As inflationary pressure unexpectedly contracted on the month in May confidence in the robust health of the US economy was dented. This suggests that the Federal Reserve is likely to take a more gradual approach to future interest rate hikes, diminishing demand for the US Dollar. If domestic data continues to disappoint in the coming days then USD exchange rates could extend their recent losses further.
If tonight’s jobless claims figures disappoint the ‘Greenback’ could come under renewed pressure, although markets remain optimistic as to the state of the labour market.
Canadian Dollar
Confidence in the Canadian Dollar remained somewhat mixed overnight, thanks to ongoing worries over the global oil oversupply glut. As a report from the International Energy Agency (IEA) forecast that excess inventories are likely to persist well into next year oil prices came under renewed pressure. The latest US crude oil inventories report further undermined Brent crude and the commodity-correlated ‘Loonie’, with stockpiles failing to fall as far as forecast.
May’s existing home sales data could boost the Canadian Dollar, providing that the domestic housing market remains in resilient health.
New Zealand Dollar
Even though the first quarter current account balance fell short of forecast this was not enough to dent the appeal of the ‘Kiwi’. As the figure returned to a state of surplus confidence in the strength of the New Zealand economy improved, particularly as the latest food prices index pointed towards an uptick in inflationary pressure. With general demand for higher-yielding currencies also picking up the New Zealand Dollar was encouraged to trend higher across the board.
If this morning’s first quarter gross domestic product figures prove encouraging the ‘Kiwi’ could extend its bullish run further.
Data Released
June 15th 08:45 NZD Gross Domestic Product (QoQ) (1Q) 0.7%
June 15th 11:30 AUD Unemployment Rate (MAY) 5.7%
June 15th 18:30 GBP Retail Sales (YoY) (MAY) 1.9%
June 15th 21:00 GBP Bank of England Rate Decision 0.25%
June 15th 22:30 USD Continuing Jobless Claims
June 15th 23:00 CAD Existing Home Sales (MoM) (MAY)