Australian dollar (AUD) supported by hot PPI
The Australian dollar (AUD) initially edged up on Friday after new data revealed a surge in Australian producer prices in the second quarter, which boosted Reserve Bank of Australia (RBA) interest rate hike bets.
However, AUD was unable to sustain its momentum into the European session, with the currency slipping back against its stronger peers.
Looking ahead, Australia’s monthly inflation gauge for July is forecast to show a 0.3% increase in price pressures. This could give the ‘Aussie’ a modest lift later this morning.
New Zealand dollar (NZD) buoyed by improving consumer sentiment
The New Zealand dollar (NZD) touched fresh multi-week highs on Friday, after New Zealand’s consumer confidence index unexpectedly rose in July to hit a five-month high.
Today, market risk appetite may drive NZD movement. If Middle East peace hopes cheer markets, the risk-sensitive ‘kiwi’ could strengthen.
Pound (GBP) recovers as government vows fiscal credibility
After a sluggish start to the session, the pound (GBP) was able to find its footing and trend broadly higher on Friday.
GBP seemed to draw support from comments from Chancellor John Healey, who vowed to follow the government’s fiscal rules as he set a date for the Autumn Budget.
The only UK data release due today is the final manufacturing PMI. Confirmation of a modest improvement in factory activity last month may support Sterling, although any gains could be limited in scope.
Euro (EUR) rebounds as inflation beats forecasts
The euro (EUR) initially weakened on Friday as a risk-on mood dampened the appeal of the safer single currency.
However, EUR was able to recoup its losses during European trading hours after the Eurozone’s July consumer price index exceeded forecasts.
Germany’s latest retail sales report could weigh on the euro today, if it reveals a 0.5% decline in June, as expected.
US dollar (USD) dented by improving mood
The US dollar (USD) softened at the end of last week, as markets continued to scale back bets on Federal Reserve interest rate hikes.
In addition, a cautiously upbeat market mood put pressure on the safe-haven ‘greenback’.
Turning to today, risk sentiment could determine the US dollar’s direction. If the market mood brightens amid hopes for a breakthrough in US-Iran negotiations, the ‘greenback’ could soften.
Canadian dollar (CAD) falls despite forecast-beating GDP
The crude-linked Canadian dollar (CAD) initially edged up on Friday thanks to rising oil prices, although the currency later slipped despite better-than-forecast Canadian GDP figures.
With Canadian data thin on the ground today, oil price dynamics could drive the ‘loonie’. If crude prices fall amid easing tensions in the Middle East, CAD exchange rates could weaken.
Data releases
11:00 AUD TD-MI Inflation Gauge (Jul)
16:00 EUR German Retail Sales (Jun)
18:30 GBP Manufacturing PMI Final (Jul)