Australian Dollar (AUD) Firms on Hawkish RBA Comments
The Australian Dollar (AUD) strengthened on Wednesday, in response to some hawkish comments from Reserve Bank of Australia (RBA) Governor Philip Lowe.
The ‘Aussie’ was also buoyed by an upbeat market mood – although risk appetite faded somewhat in the European afternoon session, AUD was able to maintain its earlier gains.
A lack of significant AU data leaves the Australian Dollar to trade on external factors today, alongside central bank dynamics. Reserve Bank of Australia (RBA) Governor Philip Lowe has struck a more dovish tone recently, threatening to sap ‘Aussie’ strength on weakening rate hike bets.
New Zealand Dollar (NZD) Firms Ahead of Trade Balance
The New Zealand Dollar (NZD) strengthened midweek, potentially buoyed by upbeat expectations for a strong domestic trade figures.
New Zealand’s trade surplus is predicted to print at NZ$398m for the month of June, indicating strong export volumes. Also lending tailwinds was a risk-on mood, despite rising Covid cases in parts of China.
Today, the ‘Kiwi’ is likely to trade predominantly on the trade balance release, although investors may also take cues from market sentiment and commodity dynamics.
Pound (GBP) Slumps as Inflation Hits 40-Year High
The Pound (GBP) weakened against its peers on Wednesday as the UK’s consumer price index hit 9.4% for the month of June.
Although higher-than-expected inflation ordinarily lends tailwinds as it increases bullish rate hike bets, Sterling appeared to fall on the prospect of worsening living conditions and central bank uncertainty.
The Bank of England (BoE) said it would consider a 50bps hike in August but would not confirm its intentions.
GBP will likely trade on external factors today, given a lack of significant UK data.
Euro (EUR) Faces Volatility on Gas Supply Uncertainty
The Euro (EUR) traded in a mixed range yesterday as reports suggested that Russia would not resume gas supplies to the EU.
Reuters initially indicated that supplies would resume, but this was contradicted by a later comment from EU President Ursula von der Leyen. Subsequent reports confirmed supplies would restart after all, although the flurry of mixed messages triggered bearish trading.
The European Central Bank (ECB) will deliver its latest interest rate decision later today. If interest rates are raised by only 25bps, the Euro may fall against its peers.
US Dollar (USD) Slides on Upbeat Market Mood
The US Dollar (USD) dropped at the beginning of Wednesday’s European session, subdued by upbeat risk flows and ongoing uncertainty over the Federal Reserve’s next move.
Markets hope the Fed will follow Canada’s lead in hiking interest rates by a full percentage point, but recently this has looked increasingly unlikely as inflation expectations soften. The ‘Greenback’ enjoyed some support later in the day, however, as risk appetite weakened.
Today, initial jobless claims and manufacturing data may influence USD. If manufacturing activity stalled in July as expected, the US Dollar could tumble.
Canadian Dollar (CAD) Dented by Below-Forecast Inflation Data
The Canadian Dollar (CAD) fell against its peers yesterday as the country’s CPI printed below forecasts. Inflation came in at 8.1% rather than 8.4% as expected.
Also subduing the ‘Loonie’ were crude prices, which lowered in spite of supply concerns.
Data Releases
July 21st 08:45 NZD Balance of Trade (Jun) NZ$398mn
July 21st 22:15 EUR ECB Interest Rate Decision 0.25%
July 21st 22:30 USD Initial Jobless Claims (16/Jul) 240,000
July 21st 22:30 USD Philadelphia Fed Manufacturing Index (Jul) 0
July 21st 22:45 EUR ECB Press Conference N/A
July 22nd 00:15 EUR ECB Lagarde Speech N/A