Australian Dollar
The Australian Dollar was on mixed form yesterday, making some solid gains versus its peers, but faltering against others like the Pound and the Euro, which were both enjoying strong tailwinds. Investors were feeling more risky and so were inclined to buy into the high-yield ‘Aussie’. There was no domestic data to provide support, but the fact that gold prices had fallen to a five-week low illustrated that markets were no longer demanding safety and were chasing after better returns.
The latest ANZ Roy Morgan weekly consumer confidence index is set for release today.
Sterling
AUD/GBP was initially pushed lower yesterday, but managed to recover to around opening levels. The Pound had risen after it was announced that Theresa May had finally secured a deal with Northern Ireland’s Democratic Unionist Party (DUP) to prop up the bruised Conservatives in Parliament in order to form a minority government. However, it seems this could still cause problems for the government, with officials from the devolved governments expressing anger that the government will provide an additional £1 billion in funding for NI, to be spent on schools, roads and hospitals.
Bank of England (BoE) Governor Mark Carney is due to speak at a press conference today on the latest Financial Stability Report. Should he suggest the financial system is facing risks, GBP could slide, but signs of strength would likely boost the Pound.
Euro
The Euro was on strong form yesterday after Italy’s government stepped in to avert a potential run on two regional lenders the European Central Bank (ECB) on Friday called ‘failing, or likely to fail’. The government will pay the country’s largest retail bank, Intesa Sanpaolo, €5 billion to take on good assets from Veneto Banca and Banca Popolare di Vicenza, while the government will cover the cost of liquidating the two banks’ bad assets. This could potentially cost the taxpayer €17 billion in total and is a solution that has raised eyebrows across the currency bloc. Many have questioned how this is allowed under the rules of the European banking union, but investors are content that the two banks won’t be pushed to collapse, sending tremors through the financial system.
US Dollar
While Federal Reserve official John Williams may have said that the central bank needs to continue gradually hiking interest rates this year, the US Dollar was on weak form yesterday. Durable goods orders figures for May showed that not only had orders last month declined by a worse-than-expected -1.1% – against forecasts for a -0.6% decline – but also that April’s drop had been revised lower to -0.9%.
There is little of note on the US economic calendar today, so USD is likely to remain soft as markets await tomorrow morning’s very early speeches from Fed officials Patrick Harker, Chair Janet Yellen and Neel Kashkari.
Canadian Dollar
A third-consecutive day’s rise in crude oil prices helped spark some demand for the Canadian Dollar, but the outlook for WTI and Brent is not looking rosy. The number of US oil rigs currently in operation had risen to a more-than three-year high, so the markets were betting against further price recovery. However, general appetite for risk kept the ‘Loonie’ in positive territory versus many of its peers.
New Zealand Dollar
Warming demand for high-yield currencies was favouring the New Zealand Dollar yesterday. There was no domestic data on offer, but weak US data and rising commodity prices helped to support the ‘Kiwi’ against its peers.
The New Zealand trade balance figures today are expected to show that the trade surplus has weakened from NZ$578 million to NZ$419 million.
June 27th 08.45 NZD Trade Balance (New Zealand Dollars) (MAY) NZ$419m
June 27th 09.30 AUD ANZ Roy Morgan Weekly Consumer Confidence Index (JUN 25)
June 27th 20.00 GBP Carney Speaks at Financial Stability Report Press Conference
June 28th 03.00 USD Fed’s Yellen Speaks on Global Economic Issues in London