Australian Dollar
As the second quarter Australian consumer price index data surprised to the downside the mood towards the ‘Aussie’ soured significantly. Inflationary pressure eased from 0.5% to 0.2% on the quarter, undermining the chances of the Reserve Bank of Australia (RBA) abandoning its neutral policy outlook any time soon. Comments from RBA Governor Philip Lowe added to the bearishness of the Australian Dollar, with the policymaker talking down the prospect of any imminent change in interest rates.
Unless demand for higher-yielding assets picks up significantly the Australian Dollar is likely to remain biased to the downside in the near term.
Sterling
Confidence in the Pound picked up in the wake of the second quarter UK gross domestic product report, even though growth only achieved a modest uptick of 0.3% on the quarter. While growth remained primarily driven by the service sector, as manufacturing and construction continued to contract, this was still enough to shore up GBP exchange rates. Even so, with Brexit-based uncertainty set to maintain pressure on the UK economy in the coming months this positive showing is unlikely to boost the appeal of Sterling for long.
Any slowdown in the latest CBI data this evening could weigh heavily on the Pound.
Euro
After Greece pulled off a successful return to the bond markets the Euro struggled to hold onto its resultant gains for long. A sharp drop in French consumer confidence took some of the wind out of the single currency’s sails, undermining recent optimism in France’s economic outlook. As the European Central Bank (ECB) looks set to maintain a relatively dovish policy standpoint in the coming months the upside potential of the Euro has remained rather limited.
If the German GfK consumer confidence index shows a similar decline on the month this could prompt the single currency to extend its losses further.
US Dollar
Although new home sales dipped markedly on the month in June the US Dollar continued to trend higher against many of the majors. In large part this strength was due to hopes that the Federal Reserve would maintain a relatively hawkish view at its latest policy meeting, potentially keeping the way open for another interest rate hike before the end of the year. However, thanks to the mixed nature of recent US data this strength remained relatively fragile in nature.
Stronger showings from tonight’s durable goods orders and advance goods trade balance could encourage investors to continue favouring the US Dollar, though.
Canadian Dollar
Another dip in US crude inventories kept oil prices on a bullish footing overnight, although this failed to particularly benefit the Canadian Dollar. After making strong gains during the early week the ‘Loonie’ lost momentum on Wednesday, with investors more inclined to sell out of the commodity-correlated currency thanks to its recent multi-month highs against rivals. This left CAD exchange rates lacking in support, especially as the global oil oversupply glut remains a significant cause for concern.
Confidence in the Canadian Dollar is likely to remain limited ahead of Friday’s gross domestic product report.
New Zealand Dollar
An unexpectedly sharp widening of the New Zealand trade surplus offered a strong boost to the ‘Kiwi’ on Wednesday. Investors were encouraged by this latest sign of strength from the domestic economy, prompting the New Zealand Dollar to make gains across the board. However, the odds of any imminent policy action from the Reserve Bank of New Zealand (RBNZ) remained distinctly muted in spite of this positive showing.
With no further New Zealand data set for release ahead of the weekend the ‘Kiwi’ will remain vulnerable to any deterioration in wider market risk sentiment.
Data Released
July 27th 16:00 EUR German GfK Consumer Confidence Survey (AUG) 10.6
July 27th 20:00 GBP CBI Retailing Reported Sales (JUL) 10
July 27th 22:30 USD Durable Goods Orders (JUN P) 3.5%
July 27th 22:30 USD Advance Goods Trade Balance (JUN P) -65 billion