Export Uptick Benefits Australian Dollar
As May’s Australian trade surplus widened further than forecast, shaking off global trade anxiety, this helped to boost AUD exchange rates yesterday. Export volumes showed a particularly solid uptick on the month, rising 4% in spite of trade tensions between the US and China. The latest building permits figures also proved positive, showing unexpected growth of 0.7% month-on-month and encouraging greater confidence in the Australian Dollar.
A similarly positive reading from May’s retail sales data could see AUD exchange rates extending their gains further this morning.
Pound Slumps as UK Service Sector Slows to a Standstill
An unexpectedly weakened UK services PMI dragged the overall composite index into a state of contraction in June, weighing down GBP exchange rates. As the service sector slowed to near-stagnation this raised concerns that the second quarter gross domestic product data could prove negative in nature. With the economy looking at increasing risk of slipping into contraction the mood towards the Pound naturally soured.
As long as the risk of further Brexit-based disruption remains GBP exchange rates may struggle to return to a positive footing in the near future.
Solid Eurozone Service Sector Performance Fails to Boost Euro
Although June’s finalised Eurozone services PMIs confirmed an uptick in growth on the month this was not enough to shore up the Euro. While the service sector helped to shore up economic activity at the end of the second quarter the lacklustre state of the manufacturing sector remains a cause for concern. News that International Monetary Fund (IMF) acting director Christine Lagarde has been nominated as the next leader of the European Central Bank (ECB) put an additional dampener on the single currency.
Resilient Eurozone retail sales data may offer some support to the Euro, however, as solid consumer spending helps to offset any weakness in trade conditions.
Signs of Economic Slowdown Continue to Dent US Dollar
Confidence in the underlying health of the US economy remained muted overnight thanks to a weaker-than-expected ISM non-manufacturing composite index. Even though the index remained firmly within growth territory, clocking in at 55.1, investors were still disappointed by this latest sign that economic momentum is fading. A sharp widening of the US trade deficit put additional pressure on the US Dollar, in spite of hopes of progress towards a fresh US-China trade agreement.
In the absence of any fresh US data the strength of USD exchange rates is likely to prove limited today.
Surprise Trade Surplus Boosts Canadian Dollar
May’s Canadian trade data painted a more encouraging picture of the economic outlook, with the trade balance showing a surprise surplus of 0.76 billion. Driven by a sharp increase in exports, this improvement gave investors fresh incentive to buy into the Canadian Dollar last night. Oil prices continued to push higher, meanwhile, as US oil inventories continued to show a decline.
Ahead of Friday’s unemployment data CAD exchange rates may struggle to gain any fresh upside momentum, however.
New Zealand Dollar Shakes Off Commodity Price Contraction
While June’s ANZ commodity price index saw a sharp decline in June this failed to drag NZD exchange rates down yesterday. The -3.9% decrease on the month suggests that global trade tensions have dragged on the New Zealand economy, helping to constrain growth. While this is likely to give the Reserve Bank of New Zealand (RBNZ) greater incentive to cut interest rates sooner rather than later, though, an improvement in market risk appetite helped to support the New Zealand Dollar.
Without the support of fresh domestic data NZD exchange rates look vulnerable to downside pressure.
Data Releases
July 4th 11:30 AUD Retail Sales (MoM) (MAY) 0.2%
July 4th 19:00 EUR Eurozone Retail Sales (YoY) (MAY) 1.6%