Australian dollar (AUD) slides despite improving mood
The Australian dollar (AUD) initially wavered in a narrow range at the end of last week’s session amid a lack of domestic data.
It then slid further in response to a stronger US dollar, with markets subdued following a major escalation in the Middle East conflict.
The situation is evolving fast, with Iran weighing its response to US air strikes on three nuclear sites overnight.
Risk sentiment remains fragile, and risk-sensitive currencies like the AUD could come under sustained pressure in the coming days.
Today, Australia’s June composite PMI looms large; a soft reading could compound AUD weakness.
New Zealand dollar (NZD) stumbles as USD rebounds
The New Zealand dollar (NZD) also dipped late last week, tracking broad USD strength and a decline in risk appetite.
Markets are on edge after Trump’s overnight decision to bomb Iranian nuclear facilities, a move that could significantly destabilise the region.
With Iran now moving to close the Strait of Hormuz, a critical channel for 20% of the world’s daily oil and gas shipments, the conflict threatens to send oil prices soaring and hit global growth.
The ‘kiwi’ may continue to falter as risk aversion deepens. With no major domestic data, NZD remains highly reactive to global sentiment.
Pound (GBP) inches higher despite dire sales
The pound (GBP) posted modest gains on Friday despite UK retail sales plunging 2.7% in May, well below expectations.
GBP was supported by reduced odds of an August BoE rate cut, following Thursday’s cautious tone.
Attention now turns to June PMIs; a sharp slowdown in services could weigh on the pound.
GBP could also come under pressure if geopolitical tensions trigger further risk aversion in global markets.
Euro (EUR) capped by softer German PPI
The euro (EUR) ticked up with a softer USD late last week, but gains were capped by a sharp drop in German PPI.
Weak German producer inflation raises concerns about broader price pressures in the eurozone.
Today’s Eurozone composite PMI is a key risk event and could limit EUR upside further.
The euro may also struggle if tensions in the Middle East escalate and investors continue to favour safe-haven assets.
US dollar (USD) turbulent as Trump bombs Iran nuclear sites
The US dollar initially weakened before rebounding sharply after President Trump ordered airstrikes on three Iranian nuclear sites overnight, a major escalation in the long-running conflict.
Markets are subdued as the situation rapidly evolves. In a move that will send shockwaves through the global economy, Iran’s parliament has approved legislation to close the Strait of Hormuz, the vital shipping channel through which around 20% of global oil and gas passes.
This action, if enforced, could block up to $1 billion in oil shipments per day and send oil prices soaring, supporting the USD through renewed safe-haven flows.
The S&P Global PMI due out tonight is expected to show a slowdown in US business activity and could add further volatility to the ‘greenback’.
Canadian dollar (CAD) falls in tandem with oil
The Canadian dollar (CAD) initially weakened as crude prices surged in response to the US-led strikes on Iran.
With Iran threatening to close the Strait of Hormuz, a key chokepoint for global oil supply, oil markets are bracing for significant disruption.
The CAD, as a petro-currency, could find support if prices spike, though market instability and risk-off flows may limit gains.
With no Canadian data on the docket today, oil price movement will likely drive CAD direction.
Data releases
09:00 AUD Composite PMI (Jun)
18:00 EUR Composite PMI (Jun)
18:30 GBP Composite PMI (Jun)
23:45 USD Composite PMI (Jun)