Australian Dollar
The Australian Dollar ended the week on mixed form, losing out against the commodity currencies and the US Dollar. Markets were largely selling the ‘Aussie’ after it hit multi-week highs, taking profit on the recent gains. This meant that AUD failed to benefit from a consistent pace of private sector credit, or the fact that China’s manufacturing PMI for June unexpectedly rose from 51.2 to 51.7, instead of weakening to 51.
The Reserve Bank of Australia (RBA) makes its next monetary policy decisions on Tuesday. As usual, no changes to interest rates are expected, but the markets will be looking for hints as to the likelihood of a change in the near future.
Sterling
AUD/GBP was able to make firm gains on Friday, with the Pound slumping across the board after a day of disappointing data. The latest GfK consumer confidence figure dropped from -5 to -10; significantly worse than the drop to -7 forecast. The reading showed that confidence was at its lowest level since the EU referendum. Meanwhile, the Office for National Statistics (ONS) revealed that households had raided their savings in order to fuel purchases, suggesting consumer spending is set to weaken even further now that the rainy day funds have been depleted.
This week will see the UK’s PMIs for June released. These will be even more important than usual, as these are the last business surveys to cover the second quarter. Economists will be able to use the data to estimate GDP for the last three months. Poor results here could therefore push the Pound significantly lower on the worry that the economy has continued to weaken.
Euro
Some positive data was not enough to push the Euro higher on Friday. German retail sales figures showed sales grew 0.5% on the month and 4.8% on an annualised basis, against forecasts of 0.3% and 2.8% respectively. Eurozone inflation data also proved positive, with overall inflation falling from 1.4% to 1.3% instead of 1.2%, while core prices unexpectedly accelerated from 1% to 1.2%. However, markets remained wary, given how earlier in the week the European Central Bank (ECB) had been at pains to point out monetary policy would remain loose. German unemployment also increased by 7,000 in June, rather than meeting forecasts of a -10,000 drop.
With some rather mixed messages having come from the ECB recently, investors will be happy to get their hands on the account of this month’s monetary policy meeting when they are released on Thursday evening.
US Dollar
The US Dollar made some very minor gains against a number of its peers on Friday, although there was little in the way of eye-catching movements. The key personal consumption data showed a surprise uptick in personal income, while spending edged down from 1.5% to 1.4% as expected. This was not enough of a shift to cause much alarm, but similarly the data was not positive enough to particularly change the outlook on monetary policy. The odds of at least one more interest rate hike this year were at 55.4%.
Markets will be eagerly awaiting Thursday’s early-morning release of the Federal Open Market Committee (FOMC) minutes from the June 14th meeting. These should shed some more light on whether policymakers are targeting anymore rate hikes this year, so will create some notable volatility for the US Dollar.
Canadian Dollar
Crude oil prices were on the rise on Friday and this was enough to keep demand for the Canadian Dollar alive, despite some disappointing domestic data. GDP figures for April showed that expansion slowed from 0.5% to 0.2% month-on-month as expected, while year-on-year GDP only climbed from 3.2% to 3.3% instead of to 3.4% as forecast. Industrial product prices declined -0.2% instead of growing by the expected 0.4% and the raw materials price index dropped -1.8% against an anticipated stagnation. These figures bode ill for the inflationary outlook, but a rise of 0.9% for WTI crude oil and of 0.7% for Brent crude helped keep the ‘Loonie’ on the rise.
Canadian unemployment figures are due for release on Friday.
New Zealand Dollar
The New Zealand Dollar was recovering from Thursday’s sell-off, pushed higher by the softness of the US Dollar and rising commodity prices. A strong reading from the latest Chinese manufacturing PMI also helped keep demand for the ‘Kiwi’ alight.
Tuesday sees the latest Global Dairy Trade auction. As dairy is New Zealand’s primary export, a rise in prices would boost the New Zealand Dollar, while a decline would tip NZD into a downtrend.
Data Released
July 3rd 10.00 NZD Dairy Auction Whole Milk Powder MT (JUL 04)
July 4th 14.30 AUD Reserve Bank of Australia Rate Decision (JUL 04)
July 5th 18.30 GBP Markit/CIPS UK Services PMI (JUN) 53.4
July 6th 04.00 USD FOMC Meeting Minutes (JUN 14)
July 6th 21.30 EUR ECB account of the monetary policy meeting
July 7th 22.30 CAD Net Change in Employment (JUN) 19k