Australian Dollar Bolstered by Sudden USD Weakness

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Headlines

  • Sudden USD Weakness Propels AUD – near-term AUD outlook mixed due to global trade concerns
  • Euro Stumbles on Bearish Credit Suisse Outlook – Political uncertainties and trade concerns dominate.
  • GBP Surges on BoE Rate Rise Split – Investors see increased chance of rate rise in August
  • US Dollar Rally Slowed by Fed Manufacturing Index – Hawkish Fed outlook limits fall


Australian Dollar

The Australian Dollar (AUD) made a surprising recovery yesterday evening, rising against the majors as investors responded to a disappointing US Philadelphia Fed manufacturing report and the ensuing drop in demand for the US Dollar (USD).

The ‘Buck’s’ lead seemed to have abated, at least for the moment, with traders lightening their bets in reaction to a minor fall in US Treasury bond yields.

Market outlook on the commodity space and indeed riskier assets like the Australian Dollar is still one of volatility, with concerns regarding global trade relations and a dovish Reserve Bank of Australia (RBA) liable to keep a cap on any meaningful rise.

Sterling

The Pound (GBP) has posted a strong performance, rallying from recent lows as investors responded to news that three members of the nine-strong Monetary Policy Committee (MPC) voted for a rate hike at the latest Bank of England (BoE) rate decision.

Most significant amongst them was perhaps Chief Economist Andy Haldane who, along with members Ian McCafferty and Michael Saunders, argued that the economy was strong enough to sufficiently handle a rise, and that higher levels of inflation warranted tighter policy measures.

Investors saw this as a strong sign that the bank could be moving to raise its baseline interest rate as soon as August this year.

Euro

The Euro (EUR) continued to struggle yesterday, falling as markets digested calls from Credit Suisse strategists to ‘short’ the Single Currency.

Analysts at Credit Suisse forecast downgrades and increasingly bearish sentiment for the single currency, with political upheaval and global trade uncertainty expected to weigh on economic growth.

Meanwhile, the current dovish stance of the European Central Bank (ECB) also weighed on the outlook for the Euro, with investors instead favouring the US Dollar and the Pound for the current hawkish stance of their respective central banks.

US Dollar

The US Dollar (USD) experienced a surprising fall against the majors yesterday, plummeting as investors responded to a weaker-than-expected US Philadelphia Fed manufacturing index.

The index slowed sharply in June, slipping from a score of 34.4 to 19.9 and marking a 19-month low.

This poor result was largely caused by a fall in new orders, but expectations for activity in the next six months also came under pressure due to growing concerns over the prospect of a trade war with China.

Today, investors will be scrutinising the latest US PMI results, with a forecast fall in the composite reading liable to put the ‘Greenback’ under pressure.

Canadian Dollar

The Canadian Dollar (CAD) was little changed against the majors yesterday and this morning, with lower oil prices and an uncertain trade outlook weighing heavily on the currency.

The price of oil, Canada’s primary export, dropped 1.8%, with expectations that crude exporters in OPEC are nearing a deal that would increase production.

With production set to outpace demand investors fled the ‘Loonie’, concerned with the possible negative ramifications that it could have on the Canadian economy.

New Zealand Dollar

The New Zealand Dollar (NZD) tumbled into the end of the week as traders reacted to New Zealand GDP easing in Q1 2018 from 2.9% to 2.7% (year-on-year).

Combined with the disappointing fall in dairy prices at the bi-weekly auction and escalating trade tensions, this news quickly weighed on the ‘Kiwi’ Dollar.


Data Released

22nd June 09:30 JPY Consumer Price Inflation
22nd June 10:30 JPY Manufacturing PMI
22nd June 13:00 NZD Credit Card Spending
22nd June 18:00 EUR Markit Eurozone PMI Readings
22nd June 22:30 CAD Retail Sales
22nd June 22:30 CAD Consumer Price Inflation
22nd June 23:45 USD Markit US PMI Readings

Post by TorFX

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