Falling Consumer Confidence Limited Australian Dollar Demand
The Australian Dollar remained under pressure as June’s Westpac consumer confidence index fell back on the month. As the index reversed the improvement seen in May the mood towards the antipodean currency diminished further, with confidence in the economic outlook looking increasingly limited. Although the Chinese consumer price index strengthened as forecast in May this was not enough to prevent AUD exchange rates from losing fresh traction.
If the labour market tightens as forecast in May, pushing the unemployment rate down, the Australian Dollar could find a rallying point this morning.
Brexit Optimism Encourages Pound
News that Labour MPs had tabled a motion aiming to prevent the risk of a no-deal Brexit encouraged the Pound to trend higher overnight. While investors have yet to see whether the motion can gain sufficient backing this still improved the general mood on Wednesday. If successful the move would limit anxiety surrounding the Conservative leadership contest, reducing the apparent risk of a hard-line Brexiteer succeeding Theresa May.
Another weak showing from the RICS house price balance may put the Pound under some pressure this morning, however.
Dovish ECB Signals Keep Euro Under Pressure
Comments from European Central Bank (ECB) policymaker, and potential future president, Francois Villeroy de Galhau gave investors fresh incentive to sell out of the single currency. As Villeroy noted that the central bank ‘could do more’ if the Eurozone economy continues to show signs of weakness the appeal of the Euro sharply declined. With the odds of further monetary loosening continuing to pick up EUR exchange rates remained on the back foot overnight.
The mood towards the Euro could sour further this evening if April’s Eurozone industrial production figures indicate an ongoing contraction in output at the start of the second quarter.
US Dollar Falters as Inflation Data Misses Forecast
The likelihood of an imminent Federal Reserve interest rate cut appeared to increase further as May’s consumer price index data fell short of forecasts. Investors were caught off guard as the headline inflation rate dipped from 2.0% to 1.8% on the year, indicating that price pressures are easing within the world’s largest economy. This saw the US Dollar stumble once again as the risk of a second potential rate cut grows.
Another weak set of jobless claims figures may add to the softness of USD exchange rates tonight.
Oil Price Slump Dents Canadian Dollar Appeal
As US crude oil inventories defied expectations to post another modest increase on the week the appeal of the Canadian Dollar proved limited. This latest increase in US stockpiles weighed heavily on the oil market, extending another sharp downtrend in prices as Brent crude moved closer to the US$60 per barrel mark. In the absence of any greater sense of market risk appetite CAD exchange rates continued to lack any particular support.
If April’s new housing price index points towards another underwhelming month for the housing market the Canadian Dollar may shed further ground.
Weak Retail Spending Fails to Drive Down New Zealand Dollar
While retail card spending faltered in May, easing -0.5% on the month, this was not enough to weigh down NZD exchange rates yesterday. Although this decline offered fresh evidence of a weakening in domestic consumer confidence the mood towards the New Zealand Dollar still picked up. This was largely thanks to the latest decline in the US Dollar, which benefitted the commodity-correlated NZD as the odds of a Federal Reserve interest rate hike continued to mount.
In the absence of any fresh domestic data, though, the New Zealand Dollar could soon return to a downtrend.
Data Releases
June 13th 09:01 GBP RICS House Price Balance (MAY) -21%
June 13th 11:30 AUD Unemployment Rate (MAY) 5.1%
June 13th 19:00 EUR Eurozone Industrial Production (YoY) (APR) -0.5%
June 13th 22:30 CAD New Housing Price Index (YoY) (APR) 0.1%
June 13th 22:30 USD Initial Jobless Claims (JUN 8) 215,000