Pound Slides as Johnson Reiterates No-Deal Brexit Pledge

Business Confidence Fall Pushes Australian Dollar Down

As the NAB business confidence index dropped from 7 to 2 in June this left investors with little incentive to favour the Australian Dollar yesterday. This fresh deterioration in business sentiment suggests that investment is likely in decline, limiting the potential for economic growth in the months ahead. A decline in the ANZ Roy Morgan weekly consumer confidence index added to the bearish mood of AUD exchange rates, meanwhile.

If the Westpac consumer confidence index also shows a retreat on the month this may keep the Australian Dollar on the back foot today.

Rising Odds of No-Deal Brexit Dent Pound

Another disappointing month for the BRC like-for-like sales index saw GBP exchange rates slide once again. With consumer spending continuing to decline in the face of Brexit-based uncertainty the mood towards the Pound naturally soured. Investors were also discouraged by the latest comments from Conservative leadership candidate Boris Johnson, who reiterated his pledge to pull the UK out of the EU with or without a deal at the end of October.

Signs of a slowdown in May’s gross domestic product readings could put additional downside pressure on the Pound.

Euro Wavers as ECB Remains Ready to Loosen Monetary Policy

Comments from new European Central Bank (ECB) chief economist Philip Lane put some pressure on the Euro last night. As Lane indicated that the ECB remains willing to take further stimulus action in order to stimulate growth and inflation the prospect of a 2019 interest rate cut remained on the table. Even so, the single currency still benefitted from the relative weakness of some of its rivals, in spite of a lack of fresh domestic data.

Ahead of tomorrow’s release of the June ECB meeting minutes, though, the Euro may struggle to find much in the way of upside momentum.

US Dollar Shakes off Small Business Optimism Dip

Although the NFIB small business optimism index dipped from 105 to 103.3 in June this was not enough to weigh down USD exchange rates overnight. While trade tensions with China and other trade partners continue to cast a shadow over the outlook of the US economy investors still favoured the US Dollar. With market risk appetite generally limited the safe-haven US Dollar naturally benefitted, limiting the impact of the negative data.

The release of the latest set of Federal Open Market Committee (FOMC) meeting minutes could drag USD exchange rates down, however.

Mixed Construction Data Limits Canadian Dollar Demand

An unexpectedly sharp decline in Canadian building permits left the Canadian Dollar on a weaker footing, pointing towards continued weakness within the construction sector. However, as June’s housing starts figure bettered forecasts, showing a solid improvement on the month this helped to limit the downside bias of CAD exchange rates. With markets increasingly bracing for the Bank of Canada (BOC) interest rate decision the volatility of the Canadian Dollar temporarily eased.

Even so, if markets see reason to bet that the BOC could shift towards greater dovishness this could weigh down CAD exchange rates.

Plunge in ANZ Truckometer Drags on New Zealand Dollar

June’s ANZ truckometer did not offer an encouraging signal for the economic outlook, slumping -4.5% on the month. This suggests that the economy struggled to find momentum in the face of ongoing international trade tensions, raising the risk of a second quarter slowdown. As weaker growth could encourage the Reserve Bank of New Zealand (RBNZ) to loosen monetary policy further the New Zealand Dollar naturally stumbled in the wake of the data.

Unless the food price index points towards a higher level of inflation the mood of NZD exchange rates is unlikely to improve this morning.

Data Releases

July 10th 08:45 NZD Food Prices (MoM) (JUN) 1.1%
July 10th 10:30 AUD Westpac Consumer Confidence (JUL) 0.3%
July 10th 18:30 GBP Gross Domestic Product (3M/3M) (MAY) 0.1%
July 11th 04:00 USD Federal Open Market Committee Meeting Minutes (JUN)

Louisa Heath