Lack of Unemployment Rate Fall Limits Australian Dollar Appeal
As the unemployment rate failed to improve as forecast in May the mood towards the Australian Dollar soured. Although this lack of change was driven by an uptick in the participation rate, indicating that a larger number of Australians are now activity within the labour market, AUD exchange rates were still left on the back foot. June’s consumer inflation expectation reading also failed to shore up the antipodean currency, with the index holding steady on the month.
A strong showing from Chinese retail sales and industrial production data could encourage demand for the Australian Dollar this morning, though.
Pound Demand Falters as Johnson Takes Lead in Conservative Leadership Race
Following the defeat of Labour’s cross-party motion to try and block the possibility of a no-deal Brexit the appeal of the Pound deteriorated. Investors found further reason to sell out of Sterling overnight once Boris Johnson emerged from the first round of voting in the Conservative leadership contest with a clear lead. The increasing risk of the UK leaving the EU without a deal limited the strength of GBP exchange rates, overshadowing positive developments in the UK housing market.
If Bank of England (BoE) Governor Mark Carney maintains a cautiously optimistic outlook in comments today, however, the Pound could find a rallying point.
Euro Remains Under Pressure as Eurozone Industrial Output Contracts
A slightly better-than-forecast contraction in Eurozone industrial production kept the Euro on a muted footing overnight. This latest sign of weakness within the Eurozone economy encouraged bets that the European Central Bank (ECB) could shift to a more dovish policy bias. Confirmation that the German inflation rate faltered in May also limited the appeal of the single currency, with signs still pointing towards price pressures failing to pick up in the months ahead.
Any easing in the German wholesale price index could see the Euro losing further ground ahead of the weekend.
Higher Jobless Claims Weigh on US Dollar
The latest increase in initial and continuing jobless claims added to the bearish outlook of the US labour market, suggesting that further employment gains are unlikely in the near term. USD exchange rates faltered in the wake of the data, which added weight to bets of an imminent Federal Reserve interest rate cut. May’s import and export price index also proved disappointing, with contractions pointing towards the ongoing negative impact of the US-China trade dispute.
With investors expecting a rebound from May’s advance retail sales data, though, the US Dollar could return to a stronger footing this evening.
Oil Price Surge Boosts Canadian Dollar After Tanker Attack
April’s new housing price index offered no surprises, clocking in at a steady 0.1% as forecast. The Canadian Dollar benefitted, however, from a sharp uptick in oil prices during Thursday’s European session. As two tankers in the Gulf of Oman suffered major damage the market reacted by boosting oil prices, lifting Brent crude 2.8% on the day’s opening levels, due to the prospect of a further escalation in regional tensions.
If oil prices fall back again, however, the appeal of the Canadian Dollar looks set to diminish.
Risk Aversion Limits New Zealand Dollar Demand
In the absence of any particular resurgence in market risk appetite the New Zealand Dollar remained on the back foot. Anxiety over the global growth outlook and trade continued to weigh on the risk-sensitive currency, especially as the Trump administration made the threat of fresh tariffs overnight. All in all, investors saw little incentive to favour the New Zealand Dollar at this stage.
Unless May’s food price index points towards an uptick in inflationary pressure NZD exchange rates could shed further ground today.
Data Releases
June 14th 08:45 NZD Food Prices (MoM) (MAY)
June 14th 16:00 EUR German Wholesale Price Index (YoY) (MAY) 2.8%
June 14th 22:30 USD Advance Retail Sales (MoM) (MAY) 0.7%
June 14th 22:55 GBP Bank of England Governor Mark Carney Speaks