Australian Dollar (AUD) Tanks amid Souring Market Sentiment
The Australian Dollar (AUD) plummeted yesterday as risk aversion swept markets. With a ‘catastrophic’ US debt default looming, Democrats and Republicans are no closer to agreeing a deal.
Declining Reserve Bank of Australia (RBA) interest rate expectations also pulled AUD lower. A dovish decision from the New Zealand central bank relieved pressure on the RBA to continue raising rates.
Australian economic data is in short supply today. As a result, market sentiment could drive movement. Will anxiety over the US debt ceiling crisis keep AUD on the defensive?
New Zealand Dollar (NZD) Slumps after Dovish RBNZ Decision
The New Zealand Dollar (NZD) also took a nosedive yesterday after the Reserve Bank of New Zealand (RBNZ) shocked markets by signalling an end to its rate hiking cycle.
Investors had expected the bank to strike a hawkish tone by signalling more rate rises to come. While the RBNZ did hike by 25bps, it indicated that its official cash rate (OCR) had peaked.
The ‘Kiwi’ could be left licking its wounds today amid a lack of data. If the market mood remains downbeat, the risk-sensitive currency could suffer further losses.
Pound (GBP) Volatile following UK Inflation
The UK’s latest consumer price index sparked volatility in the Pound (GBP) yesterday. Signs of sticky core inflation boosted Bank of England (BoE) rate hike bets, but a sharp fall in headline inflation offset the upside.
The increasingly risk-sensitive Pound was also hit by a bearish market mood, which saw GBP fall against its safer peers.
This evening, the Confederation of British Industry’s (CBI) latest retail sales balance is forecast to contract. Such a result could put fresh pressure on the Pound.
Euro (EUR) Rises despite German Data Miss
The Euro (EUR) gained ground yesterday despite a larger-than-forecast fall in German business morale.
The prevailing risk-off mood seemed to lift the safer single currency against its riskier peers.
Looking ahead, mixed German data could impact EUR. An expected improvement in German consumer confidence could aid the Euro, while confirmation that the country’s economy stalled at the start of this year could dent the single currency.
US Dollar (USD) Strengthens amid Risk Aversion
The US Dollar (USD) zigzagged higher yesterday, hitting multi-month highs against some of its peers, as a gloomy mood saw traders flock to the safe-haven ‘Greenback’.
As well as anxiety over the US debt ceiling crisis, investors were worried about slowing global economic growth.
USD could experience some choppy trade this morning as investors digest the Federal Reserve’s meeting minutes. Tonight, the second estimate of US GDP could drive movement. Will slowing US growth fuel a risk-off market mood, thereby boosting the ‘Greenback’?
Canadian Dollar (CAD) Mixed amid Thin Trading Conditions
The crude-linked Canadian Dollar (CAD) struggled to find a clear direction yesterday amid an absence of Canadian economic data and muted oil prices.
Later this evening, Canada’s latest wage growth data is due out. If it exceeds forecasts, as Canadian inflation did last week, the possibility of a less dovish approach from the Bank of Canada (BoC) could boost CAD.
25th May 04:00 USD FOMC Minutes
25th May 16:00 EUR German GfK Consumer Confidence (Jun) -24
25th May 16:00 EUR German GDP Growth Rate (Q1) 0%
25th May 20:00 GBP CBI Distributive Trades (May) -7
25th May 22:30 CAD Average Weekly Earnings (Mar) 1.7%
25th May 22:30 USD Initial Jobless Claims (20/May) 245,000
25th May 22:30 USD GDP Growth Rate (Q1) 1.1%