Australian Dollar
Even though the June services PMI showed a solid uptick in growth on the month this was not enough to shore up the ‘Aussie’. Investors are still reluctant to buy back into the antipodean currency in the wake of the Reserve Bank of Australia’s (RBA) neutral policy meeting. With the prospect of tighter monetary policy still a distant one the appeal of the Australian Dollar is likely to remain somewhat limited. A general decline in risk appetite over the outlook of the Federal Reserve also weighed on the ‘Aussie’ overnight.
If May’s trade surplus is found to have widened on the month, though, AUD exchange rates could find a rallying point this morning.
Sterling
A weaker services PMI capped off a trio of disappointing UK PMIs, pointing towards a loss of momentum across the domestic economy. Coupled with a sharp contraction in productivity, which fell -0.5% in the first quarter, this undermined confidence in both the economic outlook and the chances of the Bank of England (BoE) raising interest rates in the near future. As the economy appears to be slowing heading into the third quarter the BoE looks more likely to sit tight on monetary policy, denting the appeal of the Pound.
Ahead of Friday’s raft of production and trade data demand for Sterling is likely to remain generally limited, particularly if there are fresh signs of domestic political turmoil.
Euro
Despite a solid uptick in Eurozone retail sales the Euro struggled to make any particular headway against its rivals. While the currency union continues to demonstrate signs of strength this was overshadowed by dovish commentary from members of the European Central Bank (ECB). With the prospect of any tapering of the quantitative easing program being talked down once again the upside potential of the single currency was decidedly limited.
If the June ECB meeting minutes prove more dovish in tone this could see the Euro extend its losses across the board tonight.
US Dollar
Although May’s US factory orders data showed a sharper-than-expected contraction on the month this was not enough to particularly hamper demand for the ‘Greenback’. Markets are continuing to bet on the prospect of the Federal Reserve raising interest rates again in the near future, potentially as soon as its July meeting. This has maintained a solid degree of support for the US Dollar, even though the underlying health of the world’s largest economy remains questionable.
June’s ADP employment change figure could encourage USD bearishness, however, with any weakening in the labour market likely to deter investors.
Canadian Dollar
Bearish sentiment surrounding the oil market continued to weigh on the Canadian Dollar, with Brent crude looking set to continue trending below the US$50 per barrel mark for the foreseeable future. As OPEC exports rose for the second consecutive month in June concerns over the global oversupply glut mounted again, weighing heavily on the commodity-correlated currency on Wednesday.
Even so, if Canadian building permits show a rebound on the month in May the ‘Loonie’ could find some degree of support.
New Zealand Dollar
After a disappointing Global Dairy Trade auction the mood towards the New Zealand Dollar soured further in response to a weaker ANZ commodity price index. With risk appetite also dented by softer Chinese data there was little reason for investors to buy into the ‘Kiwi’ on Wednesday, leaving it to trend lower against many of the majors.
With no fresh domestic data due for publication today the New Zealand Dollar is likely to remain on a weaker footing, barring a significant turnaround in market sentiment.
Data Released
July 6th 11:30 AUD Trade Balance (MAY) 1.1 billion
July 6th 16:00 EUR German Factory Orders (YoY) (MAY) 4.5%
July 6th 21:30 EUR European Central Bank Meeting Minutes
July 6th 22:15 USD ADP Employment Change (JUN) 180,000
July 6th 22:30 CAD Building Permits (MoM) (MAY)