Australian dollar (AUD) supported by risk-on flows
The Australian dollar (AUD) got off to a surprisingly robust start this week amid an easing of market risk aversion.
Despite the US stepping up its strikes against Iran over the weekend, reports of diplomatic efforts behind the scenes helped to quell fears of a sustained conflict in the Gulf.
In the absence of any notable domestic economic indicators, it’s likely movement in the ‘Aussie’ will remain closely linked to market risk sentiment through today’s session.
New Zealand dollar (NZD) dented by shrinking trade surplus
The New Zealand dollar (NZD) traded with only modest support on Monday as a smaller-than-expected NZ trade surplus in June partially offset some risk-on flows.
Turning to today, New Zealand’s latest consumer price index is forecast to report an acceleration of inflation in the second quarter, likely reinforcing hawkish Reserve Bank of New Zealand (RBNZ) interest rate bets and lifting the ‘kiwi’.
Pound (GBP) stable as Burnham enters Downing Street
Trade in the pound (GBP) was mixed yesterday as Andy Burnham became the UK’s latest Prime Minister.
While Sterling sentiment was underpinned by hopes Burnham might usher in greater UK political stability, GBP investors remained wary ahead of the announcement of his new cabinet.
The focus turns back to the UK’s economic outlook today, with the pound likely to face headwinds if data shows that domestic unemployment ticked higher again in May.
Euro (EUR) slips on soft German PPI print
The euro (EUR) trended broadly lower on Tuesday, following the publication of Germany’s latest producer price index.
June’s PPI release reported a 0.3% contraction in factory gate prices, with signs of easing inflationary pressures tempering some of the more hawkish European Central Bank (ECB) interest rate expectations.
Coming up, Germany’s ZEW economic sentiment index could provide some lift for the euro today, if morale in the Eurozone’s largest economy continued to improve as expected this month.
US dollar (USD) slips as diplomats work to revive US-Iran ceasefire
The US dollar (USD) was subdued at the start of the week amid some cautious optimism in the Middle East.
While the US and Iran continued to launch strikes at one another, geopolitical tensions eased as Tehran signalled it remained open to negotiations.
Events in the Gulf may continue to act as the primary catalyst for the US dollar today, with USD demand likely to remain under pressure if there are any hints that Washington might be willing to reopen diplomatic efforts.
Canadian dollar (CAD) undermined by weaker-than-expected inflation
The Canadian dollar (CAD) retreated on Tuesday as a softer-than-expected domestic inflation print reinforced expectations the Bank of Canada (BoC) will keep interest rates on hold in the near-to-medium term.
Movement in the ‘loonie’ is likely to be tied to oil price dynamics today, potentially buoying CAD exchange rates if ongoing tensions in the Gulf propel Brent crude back above $90 a barrel.
Data releases
08:45 NZD Inflation Rate (Q2)
16:00 GBP Unemployment Rate (May)
19:00 EUR German ZEW Economic Sentiment (Jul)