Australian Dollar
While demand for the US Dollar and the Pound were weighing on market appetite for commodity-currencies yesterday, strong domestic data nonetheless helped the Australian Dollar to make some gains. Labour market figures for May significantly beat expectations, with employment climbing by 42,000 rather than the forecast 10,000. Part time employment dropped -10,100 but full time employment climbed 51,100, suggesting more and more workers were making the transition to regular, stable employment.
Sterling
AUD/GBP fluctuated wildly yesterday. UK data was poor, showing worse-than-expected rates of decline in retail sales during May. Sales declined -1.2% against forecasts of a -0.8% decline on the month, while year-on-year sales growth slowed to 0.9% instead of to 1.9%. However, the Monetary Policy Committee (MPC) interest rate decision put the Pound on bullish form. Although rates remained frozen at 0.25%, three policymakers voted for a hike; the last meeting had seen only Kristin Forbes dissenting. This suggests it won’t be long before the MPC decide inflation is too strong to ignore and so raise borrowing costs.
Euro
The Euro was on mixed form yesterday, weighed down by market tension as Eurogroup met to discuss whether to give Greece its next tranche of bailout funding. The country desperately needs the €7.5 billion pay out in order to meet maturing debt obligations in July. Additionally, Eurozone trade balance figures were disappointing, showing that the surplus had fallen in April from €22.2 billion to €19.6 billion; a slight uptick had been predicted.
Only finalised Eurozone consumer price index figures are scheduled for release today. It is expected that the overall inflation rate will be revised down from 1.9% to 1.4%. This could leave the Euro on the decline.
US Dollar
The US Dollar was on bullish form yesterday, although Australian Dollar strength kept the AUD/USD exchange rate only marginally below opening levels. The Federal Open Market Committee (FOMC) hiked interest rates to 1.25% as forecast, while also giving a lot of detail on its plan to start clearing its balance sheet. Markets had not expected so much guidance on this, so took it as a sign that the Federal Reserve is feeling more confident about the state of the economy. Inflation forecasts were cut, but this didn’t hold back USD.
Only medium-impact housing data is set for release today, but at midnight tomorrow the latest University of Michigan consumer confidence index will be released. The US Dollar is therefore likely to remain soft in anticipation of this.
Canadian Dollar
The Canadian Dollar was on largely poor form yesterday, weakening thanks to strong demand for the US Dollar. The rising Australian Dollar was lapping up all the demand for a risky commodity-correlated currency, leaving the ‘Loonie’ with little to support it higher. Manufacturing shipments figures were positive, showing growth of 1.1% instead of the forecast 0.9%, but existing home sales declined -6.2%.
New Zealand Dollar
The New Zealand Dollar slumped yesterday after poor first-quarter gross domestic product figures were released. Expected to accelerate from 0.4% to 0.7%, growth instead only climbed to 0.5%. Year-on-year growth had been expected to hold at 2.7%, but actually dipped to 2.5%.
A positive reading from today’s Business NZ performance of manufacturing index may help to soften the blow from the recent poor GDP figures.
Data Released
June 16th 08.30 NZD Business NZ Performance of Manufacturing Index (MAY)
June 16th 19.00 EUR Eurozone Consumer Price Index – Core (YoY) (MAY F) 0.9%
June 17th 00.00 USD U. of Michigan Confidence (JUN P) 97