Australian Dollar (AUD) Falls on Risk Averse Sentiment
The Australian Dollar (AUD) tumbled at the start of the week as widespread risk aversion dented the currency.
Rising commodity prices were unable to buoy the ‘Aussie’ as a Covid sub-variant was identified in China; Chinese headwinds invariably weaken AUD due to its role as a proxy for China’ economy.
Today, business confidence data may affect Australian Dollar exchange rates – if confidence fell in June as expected, the ‘Aussie’ could extend its losses.
New Zealand Dollar (NZD) Slides despite Commodity Prices
The New Zealand Dollar (NZD) mirrored movement in the Australian Dollar yesterday, as a lack of significant data left the currency exposed to risk-off flows.
If markets remain cautious we may see the ‘Kiwi’ extend its losses through today’s session.
Pound (GBP) Sentiment Dips on Economic and External Headwinds
The Pound (GBP) encountered various headwinds on Monday as recession fears continued to weigh upon Sterling alongside dovish rhetoric from the Bank of England (BoE).
Also exerting pressure upon GBP was ongoing political turmoil as the replacement for former Prime Minister Boris Johnson remains unclear. Uncertainty over the country’s next leader contributes to Pound volatility.
Today, a report from the British Retail Consortium (BRC) could affect Sterling – if sales fell in June as forecast, GBP may fall.
Euro (EUR) Undermined by Gas Supply Concerns
The Euro (EUR) dropped against several peers at the beginning of the week as the routine closure of the Nord Stream 1 pipeline for maintenance work sparked fears of reduced gas supplies.
Reuters confirmed ‘[There are] fears Russia could extend scheduled maintenance to restrict European gas supply, throwing plans to fill storage for winter into disarray.’
Russian authorities have recently threatened to cut energy supplies as the EU applies sanctions to Russia and its nationals following the invasion of Ukraine.
Today, Germany’s ZEW economic sentiment index could influence the single currency, potentially exerting EUR headwinds if morale declined as expected.
US Dollar (USD) Enjoys Risk-Off Upside
The US Dollar (USD) benefitted from a broadly risk-averse market mood yesterday, climbing against its peers despite a lack of significant US data.
Risk aversion was triggered by a variety of factors, including a Covid subvariant in China, global recession fears and the ongoing war in Ukraine.
Moreover, hawkish bets for the Federal Reserve’s next interest hike also buoyed the ‘Greenback’. Last week’s upbeat jobs report reassured officials that the Fed could continue tightening monetary policy
without undue risk of a recession.
If the risk-off mood persists ongoing safe-haven demand could set the US Dollar maintain a positive trajectory.
Canadian Dollar (CAD) Buoyed despite Falling Crude Prices
The Canadian Dollar (CAD) firmed on Monday as hawkish expectations for the Bank of Canada (BoC)’s next interest rate decision buoyed CAD sentiment.
Weakening crude oil prices were unable to dent the ‘Loonie’ as markets price in a 75bps rake hike tomorrow.
Data Releases
Jul 12th 09:01 GBP BRC Retail Sales Monitor (Jun) -0.5%
Jul 12th 11:30 AUD NAB Business Confidence (Jun) 5
Jul 12th 19:00 EUR ZEW Economic Sentiment Index (Jul) -33.5
Jul 13th 00:00 USD IBD/TIPP Economic Optimism (Jul) 38
Jul 13th 02:30 USD Fed Barkin Speech N/A
Jul 13th 03:00 GBP BoE Gov Bailey Speech N/A