Australian Dollar Pushes Higher in Spite of Steady Unemployment
While the headline unemployment rate held steady at 5.2% in June investors took encouragement from an unexpectedly steady accompanying participation rate. As markets had expected to see a modest decline in the number of Australians active within the labour market this helped the Australian Dollar to remain on a positive footing. The second quarter NAB business confidence index also offered investors cause for optimism, showing a sharp rebound from -1 to 6.
However, in the absence of any fresh Australian data releases today AUD exchange rates may struggle to maintain an uptrend for long.
Accelerating UK Retail Sales Support Pound
GBP exchange rates rallied last night after June’s UK retail sales data bettered forecasts, showing solid acceleration on the month. This positive data suggests that consumers largely shrugged off Brexit-based uncertainty in the final month of the second quarter, boosting the appeal of the Pound. Although the Office for Budget Responsibility released a fresh assessment suggesting that a no-deal Brexit will push the economy into recession this failed to prevent GBP exchange rates from recovering ground.
A narrowing of the public sector net borrowing deficit could encourage the Pound to push higher across the board heading into the weekend.
Euro Under Pressure Ahead of German Price Data
A lack of fresh Eurozone data continued to limit the strength of the Euro yesterday, with investors struggling to find any particular incentive to buy into the single currency. Meanwhile, anxiety over the currency union’s trade outlook and the likely disruption of a no-deal Brexit added to the downside pressure on EUR exchange rates. The muted strength of the US Dollar was not enough to shore up the Euro at this stage.
If this afternoon’s German producer price index figures indicate that inflationary pressure within the Eurozone’s powerhouse economy remains weak this could dent EUR exchange rates further.
Strong Manufacturing Performance Offers Limited US Dollar Support
US data proved distinctly mixed in nature last night, diminishing the potential for US Dollar gains. A surprise contraction in June’s leading index suggests that the economy remains on track to lose further momentum in the second quarter gross domestic product. On the other hand, though, July’s Philadelphia Fed manufacturing index smashed forecasts to surge from 0.3 to 21.8, pointing towards a resilient manufacturing sector.
An uptick in the University of Michigan consumer sentiment index could see demand for the US Dollar pick up more substantially tonight.
Oil Price Plunge Drags on Canadian Dollar
Although June’s ADP employment change report showed a better-than-expected increase in jobs this failed to prevent the Canadian Dollar from trending lower overnight. While this improvement suggests that the labour market has continued to tighten a fresh slump in global oil prices weighed down CAD exchange rates. News that Iranian forces had seized an oil tanker prompted a fresh bout of market anxiety, limiting the appeal of the Canadian Dollar.
Stronger retail sales figures could help to shore up CAD exchange rates tonight, however.
New Zealand Dollar Benefits from Rivals’ Weakness
Without the support of fresh domestic data the New Zealand Dollar struggled to find a direction yesterday, following the lead of its rivals instead. While weakening oil prices weighed on market risk appetite this failed to prevent NZD exchange rates pushing higher overnight. Even so, worries over the outlook of the New Zealand economy remain.
Without further signs of Federal Reserve dovishness and US Dollar weakness the mood towards the New Zealand Dollar may struggle to improve in the near term.
Data Releases
July 19th 16:00 EUR German Producer Price Index (YoY) (JUN) 1.5%
July 19th 18:30 GBP Public Sector Net Borrowing (JUN) 3.3 billion
July 19th 22:30 CAD Retail Sales (MoM) (MAY) 0.3%
July 20th 00:00 USD University of Michigan Sentiment Index (JUL) 98.6