Australian Dollar
The Australian Dollar was able to surge higher yesterday after the minutes of the latest Reserve Bank of Australia (RBA) monetary policy meeting, which took place earlier this month. Although the accounts highlighted the continued threat from the housing market bubble, policymakers also noted that wage growth appeared to have stabilised and that employment and business conditions were showing signs of strength. The minutes indicated that, even if it had no intention of hiking rates any time soon, the RBA was not intending to cut rates either. With a big downside risk removed, the Australian Dollar became much more appealing and was driven higher by the increasing demand.
Australian data today consists of only the Westpac leading index and skilled vacancies figures for May. The leading index represents the likely trajectory of the economy, in the short-term, so a rise out of last month’s negative score would support AUD demand.
Sterling
Even without domestic developments supporting the Australian Dollar, AUD/GBP would still have been able to surge yesterday. The Pound plummeted across the board after Bank of England (BoE) Governor Mark Carney claimed that it was still not the right time to start raising interest rates. Even though the Monetary Policy Committee (MPC) was split at the last decision, Carney believes that the uncertainty created by the start of Brexit negotiations threatens the stability of the economy and therefore monetary tightening would be unwise. Additionally, Standard & Poor’s warned that it may downgrade the UK’s credit rating before the final terms of the Brexit deal are known, rather than waiting to see what transpires from the negotiations.
The Pound may see a recovery tomorrow after racking up such huge losses yesterday. Additionally, it will be interesting to see whether investors give government borrowing figures much attention; there have been hints the government plans to abandon austerity measures anyway, so these figures could be very much outdated and therefore largely irrelevant.
Euro
The Euro was on mixed form yesterday, with disappointing data clashing with an upbeat forecast for the German economy in 2018. German producer prices declined by a more-than-forecast -0.2% in May, taking year-on-year growth down to 2.8% instead of 2.9%. Additionally, the Eurozone current account surplus dropped from €35.7 billion to €22 billion. However, leading German think tank Ifo forecast that German GDP would continue to strengthen in 2018 and hit 2%.
US Dollar
The US Dollar was on soft form yesterday after a trio of cautious Federal Reserve speeches undid some of the positive sentiment generated by the previous day’s comments from William Dudley. Charles Evans warned that the Federal Open Market Committee (FOMC) may be finished raising interest rates for the current year, while Stanley Fischer avoided the topic of interest rates and warned about the risk of new financial crises. In a speech delivered late last night, Eric Rosegren suggested that markets needed to get accustomed to the idea that interest rates would remain low for some time, even if he did warn that this could damage the financial system.
The only US data release on the calendar today is the MBA mortgage applications figures for the week ending 16th June. The markets are more likely to spend the day reacting to the content of Fed official Robert Kaplan’s speech early this morning.
Canadian Dollar
The Canadian Dollar was weakening yesterday after crude oil plummeted to a seven-month low on the news that Libyan oil production hit a four-year high and the volume of crude being stored in tankers hit its highest level this year. According to data released by Kpler SAS, oil producers are now storing 111.9 million barrels’ worth of crude oil at sea while they wait for market demand to pick up.
There is no Canadian data set for release today, but just after the turn of midnight tomorrow US crude oil inventories figures could push the Canadian Dollar down even further if they show rising stockpiles.
New Zealand Dollar
The New Zealand Dollar was on strong form yesterday, buoyed by US Dollar weakness and strong consumer confidence figures. The ANZ consumer confidence index rose 3.1% to a five-month high of 127.8. The sub index showing consumer expectations for the economy in a year’s time saw a significant improvement, climbing from 15 to 23. Even a -0.8% drop in dairy prices as a result of the latest global auction failed to dent ‘Kiwi’ demand.
Data Released
June 21st 10.30 AUD Westpac Leading Index (MoM) (May) 0.1%
June 21st 18.30 GBP Public Sector Net Borrowing (Pounds) (May) -£7b
June 21st 21.00 USD MBA Mortgage Applications (16 Jun) 0.7%
June 22nd 00.30 CAD US DOE Cushing OK Crude Inventory (16 Jun)