Australian Dollar
A weakening US Dollar created plenty of appetite for riskier currencies on Friday, pushing the Australian Dollar higher versus the majors. There was no domestic data to provide support, but the ‘Aussie’ was also aided by the news that iron ore prices were on the rise after a significant tumble over the past few weeks. Copper prices also jumped to a two-month high.
Private sector credit figures, released on Friday, will show whether Australian businesses are borrowing more or less money than previously. Higher borrowing indicates greater investment, which would suggest improving economic output, hiring and wage growth.
Sterling
AUD/GBP was stuck around opening levels on Friday, with Sterling making strong gains versus its peers elsewhere. Gains came after Theresa May pledged to enshrine the rights of EU citizens already living in the UK into law, provided the EU did the same for UK expats on the continent. Markets regarded this as a positive start to negotiations, but Sterling began losing ground after EU Council President Donald Tusk later rejected the proposal, stating ‘the UK’s offer is below our expectations and risks worsening the situation for our citizens’.
It is a rather quiet week for UK data although, what with the current political situation likely to remain volatile for some time, it seems unlikely that GBP is going to remain in a narrow range over the coming days. Finalised GDP figures for the first quarter could create some movement on Friday if they are revised higher or lower now that all the data is available.
Euro
The Euro was mostly on strong form on Friday, after first-quarter French GDP figures were revised upwards from 0.4% to 0.5% and job creation in the Eurozone’s second-largest economy hit a ten-year high. Most of the Eurozone PMIs released may have weakened, but overall growth remained strong; with the indices for the last three months showing the currency bloc’s private sector has had its best quarter in six years.
Eurozone consumer price index figures are released on Friday. Rising inflation would boost the Euro on increasing rate hike odds, while a slowdown in price growth could see the common currency falling.
US Dollar
Several Federal Reserve officials were due to speak early on Saturday morning, so the US Dollar spent most of Friday on the decline as investors waited to see what they would have to say. Most of the policymakers to speak since the latest interest rate hike have been cautious about the need for further monetary tightening, which has kept the odds of another increase below 50%. Markets were worried that James Bullard, Loretta Mester and Jerome Powell would also be dovish, pushing those hike odds down even further.
The most important US data due out this week will be May’s personal consumption expenditure core figures. These are the Federal Reserve’s preferred measure of inflation (most central banks use the consumer price index), so a strong figure here would help prop up rate hike odds.
Canadian Dollar
Poor inflation data caused the Canadian Dollar to slump on Friday, with consumer price growth for May clocking in below forecast. Inflation was already expected to slow on the month, but it instead dropped from 0.4% to 0.1%, instead of to 0.2%. This meant year-on-year inflation printed at 1.3% instead of at 1.5% after clocking in at 1.6% in April. The figures may cause the Bank of Canada (BOC) to do a U-turn on its recent shift to a more hawkish outlook, lowering the chances of an interest rate hike in the near future.
Canada’s April GDP figures will be released on Friday. Economists will be looking for strong growth to counterbalance the impact of that recent weak inflation data, thereby raising the odds that the BOC will remain more upbeat going forwards.
New Zealand Dollar
Like the Australian Dollar, the New Zealand Dollar was boosted on Friday by rising market risk-demand and strong commodity prices. There was no domestic data to help propel the ‘Kiwi’ even higher, so NZD did struggle to break above opening levels against the Pound and the Euro.
Data Released
June 27th 08.45 NZD Trade Balance (New Zealand Dollars) (MAY)
June 30th 11.30 AUD Private Sector Credit (MoM) (MAY) 0.4%
June 30th 18.30 GBP Gross Domestic Product (YoY) (1Q F) 0.2%
June 30th 19.00 EUR Eurozone Consumer Price Index – Core (YoY) (JUN A) 0.9%
June 30th 22.30 CAD Gross Domestic Product (YoY) (APR) 0.3%
June 30th 22.30 USD Personal Consumption Expenditure Core (MoM) (MAY)