Australian Dollar (AUD) Slides on Reduced Risk Appetite
The Australian Dollar (AUD) fell against the majority of its peers yesterday as a downbeat market mood weakened the appeal of the risk-sensitive currency. As central banks tighten monetary policy, analysts fear a global recession.
Further denting the currency, Australia’s main commodities – iron ore, coal and gold – fell in value, despite gold being generally regarded as a safe-haven asset.
Today, Australia’s business confidence data will be released and is expected to report an increase in May, from 10 to 12. If forecasts are correct, the ‘Aussie’ could claw back some of its losses.
New Zealand Dollar (NZD) Falls in Downbeat Trade
The New Zealand Dollar (NZD) also fell back on Monday, with the currency running afoul of the prevailing risk-off mood.
Looking ahead, the direction of the ‘Kiwi’ is likely to remain linked to market sentiment. Will further risk-off flows push it lower?
Pound (GBP) Slumps as UK Economy Shrinks
The Pound (GBP) weakened against its peers at the beginning of the week, as UK GDP data disappointed.
Rather than expanding by 0.1% as forecast, the UK economy shrank by 0.3% in April due to falling activity across services, manufacturing, and construction. A reduction in the use of the NHS Test and Trace provision had a considerable effect.
Today’s employment data is predicted to reveal a fall in UK unemployment, potentially lending Sterling support.
Euro (EUR) Trades Mixed Amid Data Scarcity
The Euro (EUR) traded in a mixed range yesterday as investors digested the implications of a more hawkish European Central Bank (ECB).
While analysts worry that the ECB’s rate lift-off and subsequent hikes could trigger a recession, the central bank maintains that the conditions are in place for the economy to continue to grow – including a strong labour market, fiscal support and savings built up during the pandemic.
Germany’s inflation data could support the argument for tightening, if the finalised reading confirms an increase in May as expected.
US Dollar (USD) Buoyed by Risk-Off Trading
The US Dollar (USD) benefitted the risk-adverse trading conditions on Monday’s, with the downbeat market mood attracting support toward the safe-haven currency.
Predictions of further aggressive policy tightening from the Federal Reserve also supported USD, despite some scepticism that the country can avoid a recession. Markets are pricing in approximately 215 basis points of rate hikes in 2022.
The release of the latest US PPI figures could extend the US dollar’s gains overnight, if they report US producer prices continued to rise in May.
Canadian Dollar (CAD) Firms despite Crude Dynamics
The Canadian Dollar (CAD) rose at the beginning of the week, although crude oil trended lower and a lack of data left the currency to trade on external factors.
However, should the decline in oil prices persist the ‘Loonie’ may struggle to sustain these gains today.
Data Releases
Jun 14th 11:30 AUD NAB Business Confidence (May) 12
Jun 14th 16:00 EUR German Inflation Rate Final (May) 7.9%
Jun 14th 16:00 GBP Unemployment Rate (Apr) 3.6%
Jun 14th 16:00 GBP Average Earnings Incl. Bonus (Apr) 7.6%
Jun 14th 19:00 EUR German ZEW Economic Sentiment Index (Jun) -27.5
Jun 14th 22:30 USD PPI (May) 0.8%