Australian Dollar (AUD) Quashed by US Data
The Australian Dollar (AUD) initially firmed on Wednesday, as China’s reported a larger-than-expected trade surplus. The data printed at $97.94bn rather than $75.7bn as forecast.
However AUD exchange rates retreated overnight as a sharp uptick in US inflation strengthened risk-off sentiment. A perceived-riskier asset, AUD invariably falls when trading turns bearish.
Today, employment data could influence the ‘Aussie’. If the Australian economy added 30,000 jobs in June as expected, AUD exchange rates could climb.
New Zealand Dollar (NZD) Depressed Following Interest Rate Hike
The New Zealand Dollar (NZD) slumped on Wednesday as the Reserve Bank of New Zealand (RBNZ) raised interest rates by 50bps, as forecast.
The dip in the ‘Kiwi’ may have occurred because traders had already priced in the estimated hike – a typical case of buying the rumour and selling the fact. Furthermore, the central bank’s accompanying statement was downbeat, noting obstacles to economic growth.
NZD investors could adopt a more bullish mood tomorrow in anticipation of Friday’s NZ business PMI, which is expected to show expansion in the country’s factory sector.
Pound (GBP) Sentiment Dims Following GDP Release
The Pound (GBP) weakened against its rival currencies yesterday in the wake of May’s GDP release.
The economy expanded by 0.5% rather than stalling as expected, which lent Sterling some initial support before a risk-off mood began to take a toll on the currency.
Today, a lack of UK data leaves GBP to trade on external factors such as risk appetite and political developments. If the government appears closer to appointing a new Prime Minister, Sterling may benefit from a greater degree of certainty.
Euro (EUR) Trades Mixed, Drops to Parity
The Euro (EUR) wavered in midweek trade, dropping to parity against the US Dollar (USD) following the release of US CPI data.
Capping the Euro’s losses, a spokesperson from the European Central Bank (ECB) commented that the central bank does not target a particular exchange rate. Also buoying the single currency was better-than-expected industrial production data for May, as output rose to 0.8%.
USD performance may affect Euro exchange rates today, given the currencies’ strong negative correlation.
US Dollar (USD) Firms as Inflation Exceeds Forecasts
The US Dollar strengthened on Wednesday as consumer inflation in the US rose to 9.1% in June, on an annualised basis.
The core CPI also rose above expectations, hitting 5.9%. Greater price pressures will likely encourage the Federal Reserve bank to maintain its aggressive policy tightening stance: according to the CME Group’s Fedwatch tool, the probability of a full point rate has increased to 43%.
If the producer price index reinforces today’s evidence of higher inflation, the ‘Greenback’ might climb again tomorrow.
Canadian Dollar (CAD) Jumps as BoC Hikes Rate by Full Percentage Point
The Canadian Dollar (CAD) was buoyed yesterday as the Bank of Canada (BoC) hikes interest rates by 100bps as opposed to the 75bps raise expected.
Marking the largest move since 1998, the hike demonstrates the extent to which officials are concerned by rising prices even as recession fears loom.
Data Releases
Jul 14th AUD Unemployment Rate (Jun) 3.8%
Jul 14th AUD Employment Change (Jun) 30,000
Jul 14th USD PPI (Jun) 0.8%
Jul 14th USD Initial Jobless Claims (09/Jul) 235,000
Jul 14th USD Fed Waller Speech N/A
Jul 14th NZD Business NZ PMI (Jun) 54.0