Australian Dollar (AUD) Rises on Risk-On Support
The Australian Dollar (AUD) trended up against its peers yesterday amid an upbeat market mood.
Despite a lack of Australian data, the currency strengthened on rising coal prices and optimism ahead of the Reserve Bank of Australia (RBA)’s interest rate decision today. The RBA are expected to hike rates to 1.35%.
If the central bank signals plans to maintain the current pace of monetary tightening going forward the ‘Aussie’ could extend its gains.
New Zealand Dollar (NZD) Firms in Upbeat Trade
The New Zealand Dollar (NZD) also rose at the beginning of the week, bolstered by the positive risk tone.
Today, the release of New Zealand’s second quarter business confidence figures could bolster the ‘Kiwi’ if morale is shown to have improved over the last three months.
Pound (GBP) Trends Up despite Cost-of-Living Concerns
The Pound (GBP) strengthened on Monday amid positive trading conditions, despite ongoing concerns over the UK’s cost-of-living crisis.
The British Chambers of Commerce revealed that a record number of UK firms are expected to increase prices in the next three months. Elsewhere, Ipsos’s latest political monitor found that one in three Britons would struggle to cope if inflation hits 11% this autumn, as expected.
If finalised PMI data confirms that UK services activity remained the same in June as in May, Sterling may enjoy further tailwinds – although dovish comments from the Bank of England (BoE) could cap gains.
Euro (EUR) Finds Support on Hawkish ECB
The Euro (EUR) was buoyed against several peers yesterday by comments from the European Central Bank (ECB).
Governing Council member Madis Muller said a 25bps interest rate hike would be appropriate in July followed by a 50bps raise in September. Bostjan Vasle added that further rate hikes look likely later in the year.
These remarks capped losses triggered by a fall in Germany’s trade surplus.
Finalised PMI data could affect EUR today – if service-sector activity in Germany or the Euro area fell by more than expected in June, EUR may weaken.
US Dollar (USD) Suppressed by National US Holiday
The US Dollar (USD) stumbled at in holiday thinned-trade as the start of this week, with US bond and stock markets were closed for the 4th of July holiday.
Aggressive rate hike expectations for the Federal Reserve capped any significant losses, but a move lower in US stock futures suggested losses on markets’ reopening. Meanwhile, risk-on trading limited the ‘Greenback’s safe-haven appeal.
US factory orders may buoy USD exchange rates overnight, as they are expected to have risen by 0.5% in May.
Canadian Dollar (CAD) Dips as Manufacturing PMI Misses Forecast
The Canadian Dollar (CAD) encountered headwinds on Monday as manufacturing activity in Canada expanded at the softest pace in two years.
The S&P Group manufacturing PMI printed at 54.6 in June, as opposed to 56.8 the previous month.
Data Releases
Jul 5th 09:00 AUD S&P Global Services PMI Final (Jun) 52.6
Jul 5th 11:30 AUD Retail Sales Final (May) 0.9%
Jul 5th 14:30 AUD RBA Interest Rate Decision 1.35%
Jul 5th 18:00 EUR S&P Global Services PMI Final (Jun) 52.8
Jul 5th 18:30 GBP S&P Global/CIPS UK Services PMI Final (Jun) 53.4
Jul 5th 19:30 GBP Financial Stability Report N/A
Jul 5th 20:00 GBP BoE Gov Bailey Speech N/A
Jul 6th 00:00 USD Factory Orders (May) 0.5%
Jul 6th 02:30 GBP BoE Tenreyro Speech N/A