Australian dollar (AUD) slumps amid risk aversion
The Australian dollar (AUD) tumbled yesterday, despite stronger-than-forecast PMI data, as a risk-off mood swept markets.
Concerns about debt-fuelled spending on AI and the prospect of Federal Reserve interest rate hikes led to a global tech selloff, with the anxious mood spilling over into FX markets.
Turning to today, Australia’s latest consumer price index is in the spotlight. An expected uptick in inflation in May could underpin AUD, if it’s seen as increasing the possibility of another rate hike from the Reserve Bank of Australia (RBA).
New Zealand dollar (NZD) hits multi-month lows amid risk-off mood
The anxiety in markets also weighed heavily on the New Zealand dollar (NZD) yesterday, with the ‘kiwi’ striking multi-month lows against some of its peers.
NZD could crawl up today if sentiment brightens. Conversely, ongoing risk aversion may keep the currency languishing near recent lows.
Pound (GBP) puts up a fight following downbeat PMIs
The pound (GBP) was mixed yesterday, although it showed remarkable resilience following some lacklustre PMI surveys.
Although the latest data pointed to an unexpected contraction in the UK’s vital services sector, Sterling was able to rise against weaker rivals and resist notable losses elsewhere.
Looking ahead, GBP investors may focus on UK politics today. Uncertainty over whether the government’s policy direction could change once Prime Minister Keir Starmer is replaced could subdue Sterling.
Euro (EUR) dented by contracting Eurozone activity
The euro (EUR) softened yesterday after the Eurozone’s latest PMI surveys revealed a third consecutive month of contracting private sector activity in June.
EUR was also pressured by its strong negative correlation with the US dollar (USD), as the latter currency strengthened. However, the relatively safe euro fared well against riskier rivals such as AUD and NZD.
Today, the euro could enjoy support if Germany’s latest IFO business climate indicator reveals an improvement in morale this month.
US dollar (USD) climbs amid safe-haven demand
The US dollar marched higher yesterday, as a deeply risk-averse market mood saw investors seek out the safety of the ‘greenback’.
In addition, stronger-than-forecast US PMI data boosted USD’s appeal, with activity in the manufacturing and services sectors both accelerating in June.
US economic data is in short supply on Wednesday, likely leaving the ‘greenback’ to trade on market risk dynamics. If the mood improves, the US dollar could face pressure.
Canadian dollar (CAD) finds support despite soft oil prices
The Canadian dollar (CAD) wavered higher yesterday, with the crude-linked currency shrugging off softer oil prices and enjoying its positive correlation with the US dollar.
Looking forward, Bank of Canada (BoC) Senior Deputy Governor Carolyn Rogers is due to deliver a speech. Any hawkish remarks following Monday’s hotter-than-forecast inflation figures could underpin the ‘loonie’.
Data releases
11:30 AUD Inflation Rate (May)
16:30 AUD RBA Hauser Speech
18:00 EUR German Ifo Business Climate (Jun)
21:15 CAD BoC Rogers Speech