Australian Dollar
Demand for the ‘Aussie’ slumped markedly in the wake of June’s labour market data, with the headline employment figure proving weaker than forecast. As May’s unemployment rate was unexpectedly revised up from 5.5% to 5.6% the mood towards the Australian Dollar rapidly soured, even though the data showed evidence of a greater shift towards full-time employment. This undermined optimism in the health of the Australian economy, raising the likelihood of the Reserve Bank of Australia (RBA) remaining on hold for the foreseeable future.
Commentary from RBA policymakers could provoke volatility for the ‘Aussie’ today, with any hints of dovishness likely to exacerbate its weakness.
Sterling
While June’s retail sales figures demonstrated a solid rebound on the month this was not enough to shore up the Pound yesterday. Ultimately the improvement failed to reverse the sharp contraction seen in May, with much of the growth in sales thought to have been fuelled by credit. Given the Bank of England’s (BoE) recent warnings over high levels of unsecured credit this weighed heavily on Sterling, particularly as Brexit uncertainty still looks set to be a drag on consumer confidence in the coming months.
A smaller increase in public sector net borrowing could offer the Pound a rallying point, though, with a more modest widening of the deficit likely to cheer investors.
Euro
Investors were initially disappointed to find that the European Central Bank (ECB) had not altered its policy guidance at its July meeting, reducing the chances of any meaningful shift towards greater hawkishness. However, the Euro soon rallied when President Mario Draghi commented that the central bank is planning to discuss the quantitative easing program in the autumn. While the general message remained primarily dovish this hint was enough to have investors piling back into the single currency, even as the latest Eurozone consumer confidence index disappointed.
As markets continue to process the implications of Draghi’s words the Euro could drift lower ahead of the weekend.
US Dollar
A general decline in market risk appetite and a weaker Japanese Yen helped to shore up the US Dollar overnight. The latest jobless claims figures boosted confidence in the ‘Greenback’, signalling that the labour market has continued to tighten even as wage growth remains lacklustre. Another positive signal came from June’s leading indicators report, which jumped from 0.2% to 0.6% to indicate a stronger level of growth. While recent political developments have been less-than-supportive this was not enough to keep USD exchange rates on a softer footing,
Even so, if worries over the abilities of the Trump administration intensify this could weigh on the US Dollar in the absence of any fresh domestic data.
Canadian Dollar
Although US crude oil inventories were found to have fallen further than forecast the strength of the ‘Loonie’ remained somewhat muted on Thursday. Seasonal factors are thought to have been behind much of this drawdown, with worries over the oversupply glut persisting in the face of falling Chinese demand and sustained high levels of global output. However, the Canadian Dollar was still able to benefit from the softness of some of its more vulnerable rivals.
If tonight’s Canadian consumer price index shows a softening in domestic inflation CAD exchange rates are likely to slump sharply.
New Zealand Dollar
Confidence in the ‘Kiwi’ was somewhat limited in the absence of any fresh New Zealand data, leaving the antipodean currency at the mercy of wider market developments. As the US Dollar recovered strength the higher-yielding New Zealand Dollar struggled to gain any particular momentum of its own.
An uptick in credit card spending could bolster confidence in the outlook of the New Zealand economy, however, with the ‘Kiwi’ likely to rally on the back of any increase in consumer spending.
Data Released
July 21st 12:40 AUD RBA’s Debelle Speech in Adelaide
July 21st 13:00 NZD Credit Card Spending (YoY) (JUN)
July 21st 18:00 EUR ECB Survey of Professional Forecasters
July 21st 18:30 GBP Public Sector Net Borrowing (JUN) 4.2 billion
July 21st 22:30 CAD Consumer Price Index (YoY) (JUN) 1.1%