Australian Dollar
A modest improvement in the Westpac consumer confidence index offered support to the ‘Aussie’ on Wednesday, even though sentiment was still rather less optimistic than hoped. With Australian credit card purchases found to have risen markedly on the month in May and risk appetite on the rise the Australian Dollar gained ground against its lower-yielding rivals. Even so, confidence in the underlying health of the domestic economy remains rather limited at this juncture.
However, if this morning’s consumer inflation expectation report points towards a greater level of optimism the appeal of the Australian Dollar could improve further.
Sterling
The Pound continued to experience volatility as Bank of England (BoE) policymaker Ben Broadbent indicated that he is not yet ready to vote for an interest rate hike. This undermined investor hopes that the BoE could imminently return to a tightening bias, putting GBP exchange rates under fresh downside pressure. However, as the ILO unemployment rate unexpected dipped from 4.6% to 4.5% in the three months to May the mood towards Sterling soon picked up again.
Forecasts point towards another loss of momentum in June’s RICS house price balance, which could see the Pound trending lower once again.
Euro
While Eurozone industrial production proved stronger than forecast in May this was not enough to prevent the single currency from entering a slump during Wednesday’s European session. As the latest German wholesale price index data pointed towards softening inflationary pressure the prospect of a more hawkish European Central Bank (ECB) remains distant. Given that markets continue to anticipate an aggressive pace of monetary tightening from the Federal Reserve this somewhat limits the appeal of the Euro.
As the finalised German consumer price index for June is not expected to see any change the Euro may struggle to find a rallying point in the near term.
US Dollar
Although Fed Chair Janet Yellen failed to offer anything particularly new in her testimony to the Senate demand for the US Dollar faltered. As investors are generally confident that the Fed will continue to hike interest rates in the coming months the upside potential of the ‘Greenback’ is largely limited, with greater potential for weakness. With mortgage applications also found to have contracted on the week the US Dollar lost traction, to the benefit of commodity-correlated currencies.
If tonight’s US jobless claims figures continue to paint the picture of a tightening labour market, though, the softness of the ‘Greenback’ may prove short-lived.
Canadian Dollar
In line with market expectations the Bank of Canada (BOC) voted to raise interest rates overnight, prompting the Canadian Dollar to rally to multi-month highs against many of the majors. As policymakers took a more hawkish view on the domestic inflation outlook this was seen as an encouraging shift for the central bank. Even though concerns over the oil market are likely to persist in the coming months the ‘Loonie’ could benefit from bets of further interest rate hikes to come.
A solid showing from tonight’s new housing price index should keep CAD exchange rates on a generally stronger footing.
New Zealand Dollar
Even though the ANZ truckometer failed to indicate any uptick in inflationary pressure on the month the appeal of the New Zealand Dollar improved. A general increase in market risk appetite helped to bolster the ‘Kiwi’, especially as investors are still confident that the Reserve Bank of New Zealand (RBNZ) is following the global shift towards a more hawkish policy outlook.
July’s ANZ consumer confidence index could offer a stronger boost to the New Zealand Dollar, providing domestic sentiment continues to pick up.
Data Released
July 12th 09:01 GBP RICS House Price Balance (JUN) 15%
July 12th 11:00 NZD ANZ Consumer Confidence Index (JUL)
July 12th 11:00 AUD Consumer Inflation Expectation (JUL)
July 12th 16:00 EUR German Consumer Price Index (YoY) (JUN F) 1.6%
July 12th 22:30 CAD New Housing Price Index (YoY) (MAY) 3.5%
July 12th 22:30 USD Initial Jobless Claims (JUL 08) 245,000