Australian Dollar
A disappointing ANZ Roy Morgan weekly consumer confidence index reading prompted the ‘Aussie’ to trend lower against many of the majors on Tuesday. The Australian Dollar was also weighed down by softening copper prices, with demand for the commodity dented by signs of a weaker US economy. With risk appetite generally limited investors saw little reason to favour the antipodean currency, in spite of renewed speculation over the outlook of the Federal Reserve.
In the absence of any fresh Australian data the ‘Aussie’ is likely to remain vulnerable to any shifts in wider market sentiment.
Sterling
There were few fireworks triggered by the Bank of England’s (BoE) latest Financial Stability report, with Governor Mark Carney sticking to his usual script in comments to the press. This gave markets little reason to bet on the central bank returning to a tightening bias sooner rather than later, leaving the Pound with limited support. As a YouGov survey indicated that consumer confidence has weakened sharply in the wake of the election result the outlook for Sterling is still rather bearish.
In the wake of the Conservatives finalising a confidence and supply arrangement with the DUP, though, the sense of political uncertainty that has weighed on GBP exchange rates is likely to ease.
Euro
Comments from European Central Bank (ECB) President Mario Draghi prompted the Euro to surge yesterday. While the policymaker only offered a slight change in his wording regarding the level of stimulus needed in the Eurozone this was enough to get investors piling back into the single currency. Even though the chances of the ECB tapering its quantitative easing program in the near future remain decidedly slim EUR exchange rates nevertheless capitalised on the less dovish message.
However, any signs that inflationary pressure within Germany or the wider Eurozone has softened further could swiftly return the Euro to a downtrend.
US Dollar
Optimism in the outlook of the US economy remained limited in the wake of an unexpectedly sharp contraction in US durable goods orders. Even though the latest US consumer confidence index proved more encouraging the ‘Greenback’ struggled to find any particular momentum, with doubts rising over the likelihood of the Federal Reserve raising interest rates again in the near future. As the attitude of policymakers has remained rather mixed on the subject, given muted inflationary pressure, the US Dollar remains vulnerable to downside pressure.
An upside surprise on the latest advance goods trade balance figure could offer USD exchange rates a stronger rallying point, though.
Canadian Dollar
Although oil prices were bolstered by US Dollar weakness the appeal of the commodity-correlated Canadian Dollar remained rather limited. Worries over the persistent global oversupply glut kept a lid on the commodity’s gains, with Brent crude continuing to trend below the US$47 per barrel mark. This dragged on the ‘Loonie’, particularly in the absence of any fresh domestic data.
Support could be in store for the Canadian Dollar tonight, however, with comments from Bank of Canada (BOC) Governor Poloz having the potential to provoke fresh bets of an imminent return to tighter monetary policy.
New Zealand Dollar
Demand for the ‘Kiwi’ weakened sharply in the wake of a disappointing raft of New Zealand trade data. While exports picked up strongly in the month this was accompanied by a similar uptick in imports, leaving the trade surplus narrower than forecast. This gave investors little cause for confidence in the New Zealand Dollar, leaving it vulnerable to downside pressure as market risk appetite weakened.
Ahead of Thursday’s ANZ business confidence survey the mood towards the ‘Kiwi’ is likely to remain muted, particularly if demand for higher-yielding currencies fails to improve.
Data Released
June 28th 16:00 EUR German Import Price Index (MoM) (MAY) -0.6%
June 28th 22:30 USD Advance Goods Trade Balance (MAY) -66 billion
June 28th 23:30 CAD Bank of Canada Poloz at ECB Panel