Easing Private Sector Credit Weighs on Australian Outlook
The Australian economy continued to show signs of weakness ahead of the weekend as May’s private sector credit data saw a surprise decline. This easing in private sector credit growth suggests that businesses are adopting a less optimistic outlook, leaving the Australian Dollar exposed to downside pressure. However, as markets remained hopeful of the potential for progress between the US and China at the G20 summit this helped to keep AUD exchange rates on a steady footing.
If the activity within the manufacturing sector shows signs of acceleration this morning the Australian Dollar could gain a fresh boost.
Pound Shakes Off Consumer Confidence Decline
Demand for the Pound took a blow as June’s UK GfK consumer confidence index slumped from -10 to -13, highlighting an increase in domestic political anxiety. As Conservative leadership candidate Boris Johnson refused to rule out proroguing Parliament in order to force through a no-deal Brexit this cast an additional shadow over the outlook. However, GBP exchange rates were able to recover some of their lost ground during Friday’s European session thanks to confirmation that growth picked up in the first quarter.
Further gains could be in store for the Pound this evening if June’s UK manufacturing PMI rebounds on the month as forecast.
Euro Strength Limited in spite of Eurozone Inflation Boost
Following on the heels of stronger German inflation the core Eurozone consumer price index bettered forecasts to strengthen from 0.8% to 1.1% on the year. This improvement suggests that inflationary pressure within the currency union is not as weak as previously thought. Even so, as the headline inflation rate remained some way short of the European Central Bank’s (ECB) 2% target this was not enough to diminish the odds of further monetary easing coming sooner rather than later.
Confirmation that the Eurozone manufacturing sector remained in a state of contraction in June, however, may drag the single currency lower tonight.
Weak Chicago PMI Pushes US Dollar Lower
Although the US personal consumption expenditure core proved stronger than forecast in May this was not enough to shore up the US Dollar. Investors were instead concerned by an unexpectedly dramatic decline in June’s Chicago purchasing manager index. As the index plunged from 54.2 to 49.7 confidence in the US manufacturing sector took a fresh blow, especially as US-China trade tensions and tariffs look set to weigh on growth for some time yet.
A similar decline in tonight’s ISM manufacturing index could see USD exchange rates extend their downtrend further.
Gross Domestic Product Miss Drags on Canadian Dollar
As April’s Canadian gross domestic product failed to pick up as far on the year as forecast this left the Canadian Dollar on a weaker footing. Markets were disappointed that the headline growth index only strengthened from 1.4% to 1.5% on the year, even though this was still an improvement on March’s data. With oil prices coming under pressure once again CAD exchange rates were left to trend lower ahead of the weekend.
If the oil market remains in a bearish mood today the Canadian Dollar may struggle to find any upside potential in the near term.
New Zealand Dollar Gains as Consumer Confidence Improves
A solid improvement in the ANZ consumer confidence index encouraged the New Zealand Dollar to push higher against its rivals on Friday. After the disappointing decline in business sentiment this offered investors cause for confidence, raising the prospect of stronger domestic economic activity. As markets took an optimistic view ahead of US-China talks at the G20 summit this also helped to shore up NZD exchange rates.
Any deterioration in market sentiment today could drag the New Zealand Dollar down, however.
Data Releases
July 1st 08:30 AUD Manufacturing PMI (JUN) 54
July 1st 18:00 EUR Eurozone Manufacturing PMI (JUN F) 47.8
July 1st 18:30 GBP Manufacturing PMI (JUN) 52
July 2nd 00:00 USD ISM Manufacturing (JUN) 51.5