Australian dollar (AUD) weakens as sentiment sours
The Australian dollar (AUD) fell to multi-month lows yesterday as tensions flared up again in the Middle East, with the US and Iran exchanging strikes and US President Donald Trump warning that Iran would ‘pay the price’ for not negotiating a deal.
AUD bounced off its worst levels in the evening, thanks to some dip-buying, although it remained lower overall.
A forecast jump in Australian consumer inflation expectations could lend AUD support today. However, the ‘Aussie’ could still struggle if a risk-off mood prevails.
New Zealand dollar (NZD) dented by risk-off mood
The New Zealand dollar (NZD) also initially weakened yesterday amid the risk-off tilt in markets, although NZD showed surprising resilience and regained ground in the evening.
Risk sentiment could dominate NZD exchange rates today, with the ‘kiwi’ likely to fall if markets remain worried about the situation in the Middle East.
Pound (GBP) firms despite lack of data
The pound (GBP) ticked higher yesterday, with the UK currency attracting support despite a lack of domestic economic data.
Sterling may have been supported by Bank of England (BoE) interest rate expectations, as a rise in oil prices increased the likelihood of a rate hike from the bank.
Turning to today, British economic data remains thin on the ground. As a result, Sterling may struggle to find a clear direction.
Euro (EUR) mixed as ECB decision looms
The euro (EUR) traded without a clear trajectory yesterday amid a lack of Eurozone economic data.
EUR movement was also uncertain as investors avoided taking strong positions ahead of today’s European Central Bank (ECB) interest rate decision.
The common currency could firm today if the ECB raises interest rates as expected. However, the focus will likely be on the bank’s forward guidance. Could a hawkish tone see EUR march higher?
US dollar (USD) softens despite rising inflation
The US dollar (USD) struggled yesterday, with the currency unable to capitalise on the risk-off market mood or an uptick in US inflation.
While the latest consumer price index saw headline inflation jump from 3.8% to 4.2% in May, core inflation only edged up from 2.8% to 2.9%. This failed to boost Federal Reserve rate hike bets, leaving USD lacking support.
Middle East news may be the focus for USD investors today. The ‘greenback’ could strengthen if ongoing anxiety about escalating tensions dampens market risk appetite.
Canadian dollar (CAD) underpinned by rising oil prices
The crude-linked Canadian dollar (CAD) gained ground yesterday amid rising oil prices, although CAD trimmed its gains after the Bank of Canada (BoC) struck a balanced tone following its latest interest rate decision.
Oil prices could influence the ‘loonie’ today. Expect to see CAD trend higher if renewed fighting in the Middle East prompts crude prices to climb.
Data releases
11:00 AUD Consumer Inflation Expectations (Jun)
22:15 EUR ECB Interest Rate Decision
22:30 USD PPI (May)
22:30 USD Initial Jobless Claims (06/Jun)