Australian Dollar
In spite of the dovishness displayed by Reserve Bank of Australia (RBA) policymakers ahead of the weekend the ‘Aussie’ returned to a stronger footing on Monday. The weakness of the US Dollar helped to bolster the antipodean currency, particularly as the Federal Reserve still looks set to pursue a less aggressive pace of monetary tightening. Even though the RBA seems prepared to maintain a neutral policy bias for the time being this was not enough to reduce the appeal of the Australian Dollar.
A fresh uptick in the ANZ Roy Morgan weekly consumer confidence index could encourage the ‘Aussie’ to extend its gains this morning.
Sterling
Even though the International Monetary Fund (IMF) downgraded its growth forecasts for the UK the mood towards the Pound generally improved yesterday. After hitting multi-month lows against many of its rivals Sterling benefitted from technical support, with investors encouraged to buy back into the currency in the wake of its recent losses. However, this strength remains distinctly fragile as Brexit-based uncertainty continues to loom over the future of the UK economy.
Overnight the Pound is likely to experience fresh volatility in response to the latest commentary from Bank of England (BoE) chief economist Andy Haldane, particularly if he adopts a hawkish tone.
Euro
July’s raft of Eurozone PMIs failed to boost the single currency at the start of the week, even though the data pointed towards the currency union remaining in a generally strong state of growth. Markets are still disappointed by the European Central Bank’s (ECB) persistent refusal to shift towards a more hawkish outlook, with weaker domestic data unlikely to bolster the case for policymakers to begin tapering the quantitative easing program. While Greece announced its much-anticipated return to the bond markets this was not enough to encourage a Euro rally.
If the German IFO business sentiment survey points towards an improvement in confidence, however, EUR exchange rates could find some support.
US Dollar
Political concerns continued to drag on the ‘Greenback’, with the investigation into potential links between the Trump administration and Russia still unfolding. The IMF also lowered its US growth forecasts on the back of expectations that promised infrastructure investment and tax reforms are unlikely to materialise. This weighed on demand for the US Dollar, especially as existing home sales were found to have contracted on the month in June.
Tonight’s consumer confidence index could add to the downside pressure on the ‘Greenback’, with any deterioration in sentiment likely to exacerbate worries over the health of the world’s largest economy.
Canadian Dollar
Confidence in the ‘Loonie’ picked up in response to an unexpected uptick in May’s wholesale sales figure. This positive showing helped to reverse some of the losses prompted by the discouraging inflation data, indicating that the Canadian economy remains in a relatively strong state of health. Even so, with the oil output limiting deal between OPEC and other producers showing signs of unravelling the mood towards the Canadian Dollar is unlikely to remain bullish for long.
Any fresh deterioration in oil prices may weigh heavily on CAD exchange rates in the absence of any fresh domestic data.
New Zealand Dollar
Demand for the ‘Kiwi’ was generally muted, meanwhile, as its recent strength reduces the chance of the Reserve Bank of New Zealand (RBNZ) raising interest rates in the coming months. As a stronger New Zealand Dollar hampers the growth of the domestic economy the risk of a rate cut has risen. Profit taking also helped to dent NZD exchange rates at the start of the week, even as the appeal of the safe-haven US Dollar remained limited.
With no New Zealand data set for release today the New Zealand Dollar is likely to maintain its bearishness.
Data Released
July 25th 09:30 AUD ANZ Roy Morgan Weekly Consumer Confidence Index (JUL 23)
July 25th 18:00 EUR German IFO Business Climate Index (JUL) 114.9
July 26th 00:00 USD Consumer Confidence (JUL) 116
July 26th 03:00 GBP BoE Chief Economist Haldane Speaks in London