Australian Dollar
Although there were concerns that markets had overreacted to the Reserve Bank of Australia’s (RBA) meeting minutes this was not enough to return the ‘Aussie’ to a weaker footing. Investors remain generally optimistic over the outlook of the Australian economy, even as the Westpac leading index showed a modest deterioration on the month. Demand for the commodity-correlated currency was supported by a persistent sense of risk appetite, with the diminishing odds of another 2017 Federal Reserve interest rate hike boosting the appeal of the ‘Aussie’.
Confidence in the Australian Dollar could deteriorate markedly this morning, however, in response to an uptick in the unemployment rate.
Sterling
Demand for the Pound remained generally limited on Wednesday as markets continued to process the implications of the softer UK inflation data. Even though Parliament prepared to break for its summer recess the sense of political instability failed to ease, leaving Sterling rather lacking in support. With confidence in the health of the UK economy still distinctly muted GBP exchange rates are rather lacking in any particular upside potential.
However, if June’s retail sales data shows that consumer spending continued to hold up even in the face of the wage squeeze the mood towards the Pound could improve.
Euro
The single currency trended lower across the board in the wake of May’s Eurozone construction output figures. As sector activity was found to have contracted on the month this undermined confidence in the health of the domestic economy, weighing heavily on the Euro. This weaker showing equally diminished bets that the European Central Bank (ECB) will take a more hawkish view at its latest policy meeting.
If the ECB maintains a cautious note on the Eurozone economy and talks down the prospect of any imminent tapering of the quantitative easing program this could leave EUR exchange rates to extend their recent slump.
US Dollar
Sharp rebounds in the latest US housing starts and building permits figures were not enough to materially improve the outlook of the ‘Greenback’. While this did ease some of the concerns surrounding the health of the world’s largest economy the US Dollar remained vulnerable to jitters over the domestic political situation. Investors have continued to reassess the likelihood of the Trump administration delivering on its promises of fiscal reform and tax cuts, leaving the ‘Greenback’ vulnerable to sustained downside pressure.
If tonight’s jobless claims data points towards continued tightening of the labour market, though, this may encourage a US Dollar rally.
Canadian Dollar
A better-than-expected uptick in manufacturing shipments helped to shore up the ‘Loonie’ overnight, boosting confidence in the outlook of the Canadian economy. However, the strength of the commodity-correlated Canadian Dollar remains distinctly fragile thanks to ongoing worries over the oil market. With persistently high global output looking set to keep Brent crude trapped below the US$50 per barrel mark CAD exchange rates could soon reverse their gains.
Ahead of Friday’s consumer price index report the Canadian Dollar could come under renewed pressure, particularly if US oil inventories continue to build.
New Zealand Dollar
Following another uptick in prices at the Global Dairy Trade auction the New Zealand Dollar trended higher against its lower-yielding rivals. Even so, following the poor second quarter inflation data the ‘Kiwi’ has been somewhat hampered by concerns that the Reserve Bank of New Zealand (RBNZ) may leave interest rates on hold for the foreseeable future.
In the absence of fresh New Zealand data the ‘Kiwi’ will remain primarily driven by wider market risk sentiment.
Data Released
July 20th 11:30 AUD Unemployment Rate (JUN) 5.6%
July 20th 18:30 GBP Retail Sales (YoY) (JUN) 2.5%
July 20th 21:45 EUR European Central Bank Rate Decision 0.0%
July 20th 22:30 USD Initial Jobless Claims (JUL 15) 245,000
July 20th 23:30 EUR ECB President Mario Draghi Holds Press Conference