Australian dollar (AUD) strengthens in risk-positive trade
The Australian dollar (AUD) proved to be one of the best performing major currencies at the start of this week as broad weakness in the US dollar (USD) helped to strengthen market risk appetite.
However, the ‘Aussie’ failed to sustain its best levels for long, relinquishing some of its gains overnight in response to soft Chinese data.
Australia will publish its latest consumer confidence figures later this morning, with support for the ‘Aussie’ likely to be tested if morale deteriorated as forecast this month.
New Zealand dollar (NZD) firms as mood improves
The New Zealand dollar (NZD) also benefitted from the improving market mood on Monday, although these gains were capped by weaker-than-expected growth in New Zealand’s service sector last month.
In the absence of any notable data, movement in the ‘kiwi’ is likely to remain tied to market risk dynamics today.
Pound (GBP) flat ahead of key data
The pound (GBP) treaded water yesterday, as GBP investors erred on the side of caution ahead of several high-tier UK economic releases later in the week.
Markets are bracing for volatility over the next few days as this data will likely shape expectations for whether or not the Bank of England (BoE) might tighten monetary policy before the end of the year.
The deluge of UK data opens with the publication of June’s employment figures, with the pound potentially catching bids if unemployment fell as expected at the end of the second quarter.
Euro (EUR) buoyed by USD weakness
The euro (EUR) was underpinned by its strong negative correlation with the US dollar on Monday.
However, this didn’t translate into any significant strength for the euro amid ongoing concerns over the impact of high gas prices on the Eurozone economy.
Germany will publish its latest ZEW economic index today, with the euro potentially gaining if morale in the Eurozone’s largest economy improved this month.
US dollar (USD) pressured by dovish Fed bets
The US dollar opened this week’s session on the defensive, striking new multi-month lows against many of its peers.
The pullback in USD came amid a dovish repricing of Federal Reserve interest rate expectations, following the recent string of soft US economic indicators.
Expect the ‘greenback’ to extend this decline today if the latest ADP data reports that the number of jobs added by the US economy continued to decline through the last week of July.
Canadian dollar (CAD) subdued despite rising inflation
The Canadian dollar (CAD) was muted on Monday as a sharper-than-expected rise in Canadian inflation failed to strengthen bets that the Bank of Canada (BoC) might raise interest rates later in the year.
Coming up, movement in the ‘loonie’ is likely to be tied to oil price dynamics today, potentially lifting CAD if Brent crude pushes back toward $90 per barrel.
Data Releases
10:30 AUD Consumer Confidence (Aug)
16:00 GBP Unemployment Rate (Jun)
19:00 EUR German ZEW Economic Sentiment (Aug)
22:15 USD ADP Employment Change (1/Aug)