Dovish RBA Minutes Drag Australian Dollar Down
Demand for the Australian Dollar declined sharply after the Reserve Bank of Australia (RBA) published the minutes from its June policy meeting. As policymakers acknowledged that further monetary policy loosening is more likely than not in the coming months AUD exchange rates were knocked back. Although the RBA noted that interest rates are not the only means by which to combat high unemployment levels this was not enough to shore up the Australian Dollar yesterday.
Unless the Westpac leading index shows a solid rebound on the month AUD exchange rates are likely to remain under pressure.
Threat of No-Deal Brexit Continues to Limit Pound Demand
The mood towards the Pound remained generally bearish last night thanks to the lingering threat of a no-deal Brexit. With Boris Johnson still appearing on course to comfortably win the second round of voting in the Conservative leadership election markets remain wary of the potential for further political uncertainty. Coupled with a lack of fresh supportive UK data this left GBP exchange rates with little in the way of support.
If the UK consumer price index eases as forecast this evening the Pound looks vulnerable to a further sell-off.
Euro Slumps as Draghi Hints at Interest Rate Cut
EUR exchange rates saw a sharp downturn overnight in the wake of comments from European Central Bank (ECB) President Mario Draghi. As Draghi noted that the central bank is prepared to ease monetary policy again if inflation fails to pick up the strength of the single currency rapidly diminished. With the prospect of an interest rate cut, or even renewed quantitative easing, back on the table the Euro slumped across the board.
Fresh signs of easing in May’s German producer price index data could extend the single currency’s downtrend further.
US Dollar Weakens in Anticipation of Fed Meeting
The latest US construction data proved mixed in nature, limiting the strength of the US Dollar last night. Although housing starts saw an upward revision in April this was not enough to outweigh the decline in May’s figure. While concerns over the outlook of the US economy remain USD exchange rates also came under pressure as global monetary policy continued to shift towards greater dovishness.
As anticipation mounts for tomorrow’s Federal Open Market Committee (FOMC) interest rate decision the potential for a US Dollar rally appears limited.
Surprise Manufacturing Sales Contraction Dents Canadian Dollar
April’s Canadian manufacturing sales data proved disappointing, driving CAD exchange rates lower overnight. As sales unexpectedly contracted -0.6% on the month this provoked fresh market worries over the underlying health of the Canadian economy. This decline suggests that the manufacturing sector is in a weaker state than previously thought, dragging the Canadian Dollar down against its rivals.
However, an improvement in tonight’s Canadian consumer price index may give investors incentive to favour the Canadian Dollar once again.
New Zealand Dollar Shakes Off Disappointing Dairy Price Slide
A slight weakening in the second quarter Westpac consumer confidence index was not enough to weigh on the New Zealand Dollar yesterday. Although the index showed a modest decline NZD exchange rates remained on a stronger footing, benefitting from the weakness of the US Dollar. Even a poor showing from the latest Global Dairy Trade auction, which saw prices slump -3.8%, failed to dent the antipodean currency.
Even so, NZD exchange rates look vulnerable if the first quarter current account gross domestic product ratio remains firmly in negative territory.
Data Releases
June 19th 08:45 NZD Current Account Gross Domestic Product Ratio (Q1) -3.5%
June 19th 10:30 AUD Westpac Leading Index (MoM) (MAY) 0.1%
June 19th 16:00 EUR German Producer Price Index (YoY) (MAY) 2.2%
June 19th 18:30 GBP Consumer Price Index (YoY) (MAY) 2.0%
June 19th 22:30 CAD Consumer Price Index (YoY) (MAY) 2.1%
June 20th 04:00 USD Federal Open Market Committee Rate Decision 2.5%