Euro Slips as Signs Continue to Point Towards German Slowdown

Australian Dollar Struggles for Direction

The Australian Dollar started the week on a softer footing, lacking the support of any fresh domestic data. With the Reserve Bank of Australia (RBA) still appearing on course to cut interest rates again before the end of the year AUD exchange rates struggled to find much in the way of strength. Market anxiety over a continued lack of progress towards a US-China trade agreement also limited the appeal of the antipodean currency yesterday, with investors remaining in a relatively risk-averse mind set.

As forecasts point towards a sharp slide in this morning’s NAB business confidence index the mood towards the Australian Dollar could sour further.

No-Deal Brexit Fears Keep Pound Under Pressure

Confidence in the Pound remained generally lacking last night as anxiety over the risk of a no-deal Brexit persisted. The ongoing Conservative leadership contest continued to weigh on GBP exchange rates, meanwhile, with markets still pricing in the odds of a potential general election before the end of the year. In the absence of any fresh UK data investors saw little incentive to buy into Sterling at this stage, given the lingering air of political uncertainty.

Unless June’s BRC like-for-like retail sales data shows a solid rebound on the month the appeal of the Pound is unlikely to improve today.

Disappointing German Industrial Production Weighs on Euro

May’s German industrial production data disappointed, following in the footsteps of Friday’s underwhelming factory orders figures. This offered fresh evidence that the Eurozone’s powerhouse economy continues to lack momentum within its manufacturing sector, to the detriment of the Euro. Even so, the downside pressure on EUR exchange rates was limited thanks to a stronger-than-expected rebound in German export volumes on the month.

Without any fresh Eurozone data set for release today the Euro may struggle to regain any particular traction against its rivals.

US Dollar Trends Higher Ahead of Business Optimism Index

As market risk appetite diminished the US Dollar benefitted, holding onto a stronger footing across the board at the start of the week. While investors still expect to see the Federal Reserve cut interest rates at its July meeting, in spite of last week’s solid jobs data, this was not enough to weigh down USD exchange rates. With demand for commodity-correlated currencies limited the US Dollar was pushed higher against many of the majors.

Any deterioration in the NFIB small business optimism index could weigh on USD exchange rates tonight, however.

Oil Price Uptick Unable to Shore up Canadian Dollar

Although oil prices remained on a positive footing last night the Canadian Dollar still struggled to find support. While escalating tensions in the Middle East threaten to limit global oil supplies the prospect of further conflict limited the appeal of the risk-sensitive Canadian Dollar. With the Chinese economy also showing signs of slowing there are concerns that global oil demand is likely to diminish, potentially dragging down prices once again.

A weaker month of growth in building permits may leave CAD exchange rates on the back foot this evening.

Market Risk-Aversion Fails to Dent New Zealand Dollar

While market risk appetite proved limited at the start of the week the New Zealand Dollar managed to avoid a downtrend. However, as global trade tensions persist and central banks continue to shift towards a dovish outlook this could drag NZD exchange rates down in the near future. As long as the Reserve Bank of New Zealand (RBNZ) looks set to cut interest rates the potential for NZD gains may prove limited.

If the ANZ truckometer points towards a weaker level of economic activity this could drag the New Zealand Dollar down against its rivals.

Data Releases

July 9th 08:00 NZD ANZ Truckometer (MoM) (JUN)
July 9th 09:01 GBP BRC Like-for-Like Sales (YoY) (JUN) -1.5%
July 9th 11:30 AUD NAB Business Confidence (JUN) 2
July 9th 20:00 USD NFIB Small Business Optimism (JUN) 103.1
July 9th 22:30 CAD Building Permits (MoM) (MAY) 1.3%

Louisa Heath

louisa.heath@torfx.com


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