Loss of Economic Momentum Drags on Australian Dollar
May’s Westpac leading index failed to offer the Australian Dollar any cause for confidence, pointing towards a continued loss of momentum within the Australian economy. As April’s index was also revised lower this left investors with little incentive to favour the antipodean currency yesterday. With the economy looking set to lose further ground in the second quarter the risk of further Reserve Bank of Australia (RBA) monetary loosening picked up, pushing AUD exchange rates down across the board.
Fresh comments from RBA Governor Philip Lowe could add to the bearish mood of the Australian Dollar this morning.
Pound Pushes Higher Ahead of BoE Announcement
Although the UK consumer price index eased as forecast in May this was not enough to weigh down the Pound last night. As the easing in inflationary pressure points towards a stronger level of wage growth, boosting the potential for household spending, GBP exchange rates remained on a solid footing during Wednesday’s European session. While anxiety over the rising odds of a no-deal Brexit remain the Pound largely shook off political jitters for the time being.
If the Bank of England (BoE) maintains a hawkish bias in its latest meeting minutes this could see GBP exchange rates gaining further ground tonight.
Disappointing German Producer Prices Weigh Down Euro
German producer price index data proved underwhelming in May, showing a surprise -0.1% contraction on the month. This indicates that inflationary pressure within the Eurozone’s powerhouse economy remains muted, contrary to the hopes of the European Central Bank (ECB). Given the dovish nature of recent comments from ECB President Mario Draghi this weaker showing left the Euro on the back foot overnight.
Further signs of caution in the ECB’s latest Economic Bulletin may drive the single currency to extend its losses.
US Dollar Softened on Fed Rate Cut Speculation
Anticipation ahead of the Federal Open Market Committee (FOMC) interest rate announcement kept the US Dollar under pressure. With markets continuing to assess the likelihood of interest rates being cut once or twice before the end of the year support for USD exchange rates proved limited. A contraction in the MBA mortgage applications figure further undermined confidence in the health of the US economy, further diminishing the appeal of the US Dollar.
Any slowdown in tonight’s Philadelphia Fed business outlook index could see USD exchange rates trending lower.
Canadian Dollar Rallies on Stronger Inflation
Demand for the Canadian Dollar improved in the wake of May’s consumer price index data. As the headline annual inflation rate bettered expectations to strengthen from 2.0% to 2.4% investors found fresh cause for confidence in the Canadian economy. This uptick in inflation limits the odds of the Bank of Canada (BOC) cutting interest rates in the near future, boosting CAD exchange rates in turn.
In the absence of further encouraging data, though, the Canadian Dollar could struggle to hold onto its gains for long.
Current Account Surplus Fails to Boost New Zealand Dollar
While the first quarter current account balance returned to a state of surplus the New Zealand Dollar still fell out of favour yesterday. Investors were more concerned by the persistently negative current account to gross domestic product ratio, which clocked in at -3.6% in the first quarter. With the New Zealand economy continuing to demonstrate signs of vulnerability NZD exchange rates were exposed to fresh downside pressure.
An uptick in today’s first quarter gross domestic product data may offer the New Zealand Dollar a rallying point, however.
Data Releases
June 20th 08:45 NZD Gross Domestic Product (YoY) (1Q) 2.4%
June 20th 11:15 AUD Reserve Bank of Australia Governor Philp Lowe Speech
June 20th 18:00 EUR European Central Bank Economic Bulletin
June 20th 21:00 GBP Bank of England Rate Decision 0.75%
June 20th 22:30 USD Philadelphia Fed Business Outlook (JUN) 10.4