Australian Dollar (AUD) Mixed amid Fluctuating Market Mood
The Australian Dollar (AUD) wavered on Thursday as fluctuating risk sentiment offered no clear directional bias for the currency.
Also subduing the ‘Aussie’ was a mixed employment report that revealed unemployment remained unchanged in May alongside a better-than-expected increase in hires. Overall, the data was interpreted positively, but failed to boost AUD against its peers.
Today, a lack of AU data exposes the currency to downside risks; the Australian Dollar is likely to continue trade on risk sentiment though may enjoy tailwinds via a hawkish Reserve Bank of Australia (RBA).
New Zealand Dollar (NZD) Trades Mixed on Poor GDP Release
The New Zealand Dollar (NZD) faced headwinds yesterday in the form of weaker-than-expected GDP figures.
GDP growth in NZ contracted by 0.2% in the first quarter of 2021 rather than increasing by 0.6% as forecast – heightening concerns that aggressive policy tightening moves by major central banks are damaging the global economy.
Looking ahead, the ‘Kiwi’ may enjoy support today on increasing business activity – May’s PMI is expected to climb to 52 from 51.2 in April.
Pound (GBP) Recovers Following BoE Decision
The Pound (GBP) rebounded after a brief drop on Thursday following the Bank of England (BoE)’s interest rate decision.
The UK’s central bank raised rates by 0.25% – the fifth rate hike in a row – in a move that was largely anticipated, although three of the MPC’s nine rate-setters pushed for a larger rise of 0.5% to tackle an inflation rate that is heading towards 11%.
Sterling is likely to trade on risk sentiment today, which may be affected by recent central bank activity as well as geopolitical concerns. If market mood deteriorates, GBP has potential to fall.
Euro (EUR) Faces Headwinds over ECB Reinvestment Measures
The Euro (EUR) slumped against several peers yesterday, on concerns that the European Central Bank (ECB)’s response to the fragmentation of the bond market is insufficient.
The ECB said on Wednesday that it would ‘tilt reinvestments of maturing debt to help more indebted countries’, but critics argue that such a measure is ‘too little’ as yields continue to spike dramatically.
Today, the Euro area’s finalised inflation release may influence single currency exchange rates. If inflation rises above 8%, investors could turn bullish on hopes for aggressive interest rate hikes.
US Dollar (USD) Enjoys Risk-Off Upside
The US Dollar (USD) found support on Thursday from negative risk flows, which directed investment towards safe-haven assets.
Furthermore, the number of initial jobless claims last week decreased upon the week previous – although not by as much as expected. USD may also have retained some tailwinds from the Federal Reserve’s rate decision, which saw rate-setters hike interest by 75bps on Wednesday.
If US industrial production data reveals a slowdown in productivity in May, as expected, the ‘Greenback’ may attract further safe-haven support on the prospect of a weakening economy.
Canadian Dollar (CAD) Slopes on WTI Dynamics
The Canadian Dollar (CAD) sank against several peers yesterday as the value of WTI crude decreased. The commodity-linked ‘Loonie’ struggles to find support while oil prices are weakening.
Data Releases
Jun 17th 08:30 NZD Business NZ PMI (May) 52
Jun 17th 19:00 EUR Inflation Rate Final (May) 8.1%
Jun 17th 22:45 USD Fed Chair Powell Speech N/A
Jun 17th 23:15 USD Industrial Production (May) 0.4%