Australian Dollar (AUD) Retains Strength as RBA Remain Hawkish
The Australian Dollar (AUD) trended up against several of its peers yesterday in spite of risk-off headwinds.
Increasing fears of a global recession contributed towards bearish trading – but the ‘Aussie’ appears to be supported by rising commodity prices. A hawkish Reserve Bank of Australia (RBA) may be lending additional support, although analysts believe further tightening expectations are overdone.
Today, Australia’s trade balance is expected to reveal an increased surplus for the month of May, potentially buoying AUD further.
New Zealand Dollar (NZD) Firms on Commodity Prices
The New Zealand Dollar (NZD) found some support midweek, as New Zealand’s main exports rose in value.
The ‘Kiwi’ will likely trade on external factors today, given a lack of significant NZ data. If the mood remains broadly cautious NZD exchange rates may weaken.
Pound (GBP) Dented by Political Whirlwind
The Pound (GBP) tumbled against several of its rival currencies on Wednesday as successive parliamentary resignations knocked investors’ confidence.
Boris Johnson faced perhaps his toughest Prime Minister’s Questions yet, as members of Parliament questioned why he hadn’t left office with his former chancellor and health secretary.
Nevertheless, Johnson vowed to stay on as Prime Minister while Sterling headwinds were compounded by weak trading sentiment.
Today, a speech from Bank of England (BoE) policymaker Catherine Mann could weaken GBP further if she reiterates the bank’s comparatively dovish policy tightening stance.
Euro (EUR) Falls as Recession Fears Mount
The Euro (EUR) encountered headwinds yesterday as a risk-off market mood dampened support for the currency alongside persistent fears of a recession.
The bloc’s economy is far from stable, with PMIs suggesting uneven growth and inflation pressures escalating over surging fuel prices. The European Central Bank (ECB) maintains a hawkish tone, but investors worry that its predictions are overly optimistic as supply pressures tighten.
German industrial production could support the single currency today, if it increased as expected in May.
US Dollar (USD) Climbs on Risk Aversion
The US Dollar (USD) initially enjoyed support in Wednesday’s European session as widespread risk aversion drew safe-haven support to the currency.
USD was subsequently buoyed later in the day as June’s ISM non-manufacturing PMI revealed a smaller than expected drop in growth.
Overnight, the Federal Reserve’s FOMC minutes may have had some impact, which could continue to inspire tailwinds today if a hawkish tone was struck.
Canadian Dollar (CAD) Supported despite WTI Weakness
The Canadian Dollar (CAD) enjoyed support in midweek trade although crude oil prices dropped on fears of a recession and consequent shortage in demand.
Expectations that today’s trade balance will reveal a surplus of C$2.4bn may have attracted some tailwinds.
Data Releases
Jul 7th 11:30 AUD Balance of Trade (May) A$10.725bn
Jul 7th 16:00 EUR German Industrial Production (May) 0.4%
Jul 7th 18:30 GBP BoE Mann Speech N/A
Jul 7th 21:30 EUR ECB Monetary Policy Meeting Accounts N/A
Jul 7th 22:15 USD ADP Employment Change (Jun) 200,000
Jul 7th 22:30 CAD Balance of Trade (May) C$2.4bn
Jul 7th 22:30 USD Balance of Trade (May) $-84.9bn
Jul 7th 22:30 USD Initial Jobless Claims (2/July) 230,000
Jul 8th 00:00 CAD Ivey PMI s.a (Jun) 64
Jul 8th 03:00 USD Fed Waller Speech N/A
Jul 7th 03:00 USD Fed Buller Speech N/A