Australian dollar (AUD) slips as Middle East tensions escalate
The Australian dollar (AUD) initially ticked higher yesterday, amid hopes that the latest flare-up of tensions in the Strait of Hormuz would die down.
However, sentiment soured as the session went on, with the US launching retaliatory strikes against Iran and reimposing sanctions. Worries that the situation would continue to escalate dampened demand for the risk-sensitive ‘Aussie’.
Markets may remain focused on the Middle East today, with AUD poised to fall if fears remain that the US-Iran peace deal could unravel.
New Zealand dollar (NZD) rallies as RBNZ hikes rates
The New Zealand dollar (NZD) leapt higher yesterday as the Reserve Bank of New Zealand (RBNZ) raised interest rates and signalled that further tightening is possible in the months ahead.
Turning to today, the ‘kiwi’ could face pressure after New Zealand’s latest manufacturing PMI showed a second consecutive contraction in factory activity in June.
Pound (GBP) recovers amid BoE bets
The pound (GBP) initially wobbled yesterday as a lack of UK economic data left Sterling vulnerable to volatility.
However, GBP managed to find its footing in the evening, thanks to ongoing optimism around the UK government leadership transition and an uptick in Bank of England (BoE) interest rate hike bets.
Today, nominations open for the Labour leadership contest. If frontrunner Andy Burnham looks set to remain unopposed, Sterling may draw support.
Euro (EUR) unsure in absence of data
The euro (EUR) faced choppy movement yesterday as a lack of Eurozone data left the currency without a clear directional bias.
While a cautious mood helped the safer single currency against some of its riskier peers, EUR’s negative correlation with the US dollar (USD) complicated the picture.
The European Central Bank’s (ECB) latest policy meeting minutes are due out tonight. Any hints that policymakers are open to further rate hikes could support the euro.
US dollar (USD) underpinned by risk aversion
The safe-haven US dollar wavered higher against many of its peers yesterday thanks to a prevailing risk-off market mood.
However, the looming Federal Reserve meeting minutes seemed to limit USD’s upside.
The Fed minutes, published overnight, could affect USD through today’s session. Meanwhile, the ‘greenback’ could draw support if US-Iran relations remain tense.
Canadian dollar (CAD) climbs as oil continues to rise
The commodity-linked Canadian dollar (CAD) was one of yesterday’s clear winners, as a 7% jump in crude prices boosted the currency.
Oil price dynamics are likely to continue driving CAD today, with the ‘loonie’ poised to strengthen further if crude rises amid escalating tensions in the Middle East.
Data releases
08:30 NZD Business NZ PMI (Jun)
16:00 EUR Balance of Trade (May)
21:30 EUR ECB Monetary Policy Meeting Accounts
22:30 USD Initial Jobless Claims (04/Jul)