Australian Dollar (AUD) Rises on Risk-On Trade
Monday saw upbeat trade for the Australian Dollar (AUD), as the market mood shifted towards a risk-on sentiment.
However, the consensus amongst analysts is that the Reserve Bank of Australia (RBA) will pause their tightening cycle, on the back of softer-than-expected inflation. This capped AUD’s gains.
The RBA takes the stage this afternoon and could propel the ‘Aussie’ higher if they push ahead with a 25bps hike. If they leave rates unchanged, however, AUD could tumble.
New Zealand Dollar (NZD) Firms on Better-than-Expected Chinese Data
Yesterday, the New Zealand Dollar (NZD) managed to firm against its peers on better-than-expected Chinese manufacturing data.
The Caixin manufacturing PMI printed above forecast at 50.5. While this marked a slowdown in the sector, economists had anticipated a sharper fall.
The ‘Kiwi’ could be supported by its correlation with the ‘Aussie’ today, should the RBA provide hawkish forward guidance. However, an absence of further releases may limit any gains.
Pound (GBP) Listless as Data Drought Returns
Quiet trade characterised the Pound’s (GBP) session on Monday, with little in the way of data drivers to spark trade.
However, some positivity around the UK’s cost-of-living crisis may have cushioned GBP. The UK government promised to implement suggestions from the Competition and Markets Authority (CMA) in order to tackle sky-high fuel prices.
Owing to a lack of macroeconomic releases, Sterling may continue to trade on market dynamics today.
Euro (EUR) Muted amid Confirmation of Manufacturing Slump
With the Eurozone’s manufacturing index confirmed to have slumped in June, the Euro (EUR) struggled for support.
European Central Bank (ECB) policymaker Joachim Nagel’s hawkish speech, wherein he signalled room for further hikes, proved uninspiring.
This afternoon sees the release of the latest German balance of trade data. Germany’s trade surplus is forecast to have grown over May, which could boost EUR.
US Dollar (USD) Weakens amid Sharp Drop in Factory Activity
The ISM manufacturing index for June contracted more than forecast on Monday, denting the US Dollar (USD).
Owing to a sharp drop in demand for goods, US factory activity shrank at its fastest rate since May 2020. As such, Federal Reserve rate hike bets may have diminished, prompting upbeat trade elsewhere.
As American markets are closed today in observance of Independence Day, the ‘Greenback’ may see little directional trade.
Canadian Dollar (CAD) Buoyed by Oil Production Cuts
Saudi Arabia and Russia announced further oil production cuts yesterday, boosting expectations of higher oil demand. This kept the commodity-linked Canadian Dollar (CAD) afloat.
Tonight, June’s manufacturing index could dent the ‘Loonie’, if it contracts further as forecast.
Data Releases
Jul 4th 14:30 AUD RBA Interest Rate Decision 4.35%
Jul 4th 16:00 EUR DE Balance of Trade (May) €17.5bn
Jul 4th 23:30 CAD Manufacturing PMI (Jun) 48.4