Australian Dollar
In the absence of fresh domestic data the ‘Aussie’ was buoyed by a general uptick in market risk appetite. With commodity prices strengthening on the back of a weaker US Dollar the appeal of the Australian Dollar improved. However, as the antipodean currency was largely driven by the softness of other majors its gains remained fragile.
An uptick in the HIA new home sales might boost the appeal of the Australian Dollar, although a reminder of the heat of the domestic housing market could provoke worries over the outlook of the Reserve Bank of Australia (RBA).
Sterling
Trade turned volatile for the Pound as the message from Bank of England (BoE) policymakers continued to differ. While deputy governor Jon Cunliffe reiterated a more dovish view, that the justification for higher interest rates remains insufficient, this was contrasted by comments from Governor Mark Carney. Although Carney did not take a particularly hawkish tone his note that ‘some removal of monetary stimulus is likely to be necessary’ encouraged investors to pile back into the Pound.
Even so, any disappointment from May’s net consumer credit and mortgage approvals figures could see Sterling swiftly return to a downtrend.
Euro
The mood towards the single currency abruptly soured overnight as sources within the European Central Bank (ECB) warned that President Mario Draghi’s earlier comments had been misinterpreted. Investors were discouraged by the suggestion that Draghi was signalling tolerance for a period of weaker inflationary pressure, diminishing the likelihood of any monetary tightening in the near future. This left the Euro on a sharp downtrend across the board, particularly as the latest German import price index results also disappointed.
A weaker showing from tonight’s German consumer price index report could undermine the appeal of the Euro further, weakening the impetus for the ECB to consider tighter monetary policy.
US Dollar
Even though the US advance goods trade deficit narrowed further than forecast this was not enough to prompt a significant shift for the US Dollar. Confidence in the health of the US economy remains somewhat limited at this juncture, particularly as investors were inclined to favour higher-yielding assets over the ‘Greenback’. With the chances of the Federal Reserve raising interest rates again before the end of the year looking mixed the US Dollar is likely to remain on a bearish footing against its rivals.
Nevertheless, if the latest jobless claims figures continue to point towards a tighter labour market any further USD losses may be limited.
Canadian Dollar
Confidence in the ‘Loonie’ strengthened sharply in response to commentary from Bank of Canada (BOC) Governor Stephen Poloz, who sounded a rather hawkish note. Markets have been inclined to revise up the odds of the BOC raising interest rates before the end of the year, with Poloz taking a more optimistic view of the domestic economy. Although concerns over the global oversupply glut continued to limit the strength of oil prices this was not enough to particularly hamper the Canadian Dollar rally.
Even so, if market risk appetite starts to deteriorate once again CAD exchange rates remain vulnerable to renewed downside pressure.
New Zealand Dollar
Worries over the outlook of the New Zealand economy continued to limit the appeal of the ‘Kiwi’ on Wednesday. The disappointing May trade surplus still weighed on the minds of investors, keeping the New Zealand Dollar from benefitting particularly even as risk appetite generally picked up.
A strong showing from this morning’s ANZ activity outlook index, however, could offer the New Zealand Dollar a more tangible rallying point.
Data Released
June 29th 11:00 NZD ANZ Activity Outlook (JUN)
June 29th 11:00 AUD HIA New Home Sales (MoM) (MAY)
June 29th 18:30 GBP Net Consumer Credit (MAY) 1.4 billion
June 29th 18:30 GBP Mortgage Approvals 64,000
June 29th 22:00 EUR German Consumer Price Index (YoY) (JUN) 1.4%
June 29th 22:30 USD Initial Jobless Claims (JUN 24) 240,000