Australian Dollar Comes under Pressure amid Chinese Yuan Sell-off

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Headlines

  • Chinese Yuan Weakens – Australian Dollar outlook worsens
  • Investors Weigh up Merkel Migrant Crisis – Euro exchange rates soften
  • GBP Pressured by Dovish BoE Haskel – Soon-to-be policymaker proves slightly dovish
  • USD Bolstered by Upbeat Manufacturing Activity Report – USD outlook remains positive


Australian Dollar

The Australian Dollar (AUD) traded lower against all currencies except the Euro and the Pound yesterday, with its weakest performance being against the US Dollar.

The ‘Aussie’ Dollar’s suffering was predominantly due to weakness across the Chinese financial markets, with the Chinese Yuan (CNY) sinking against the majors and dragging the Australian Dollar down with it.

On the data front, investors were also disappointed to see a small contraction in the ANZ Roy Morgan weekly consumer confidence index for June 24, with the score falling from 122.1 to 121.4.

Today, we expect trade relations and the bullish USD to continue to dominate, with the ‘Aussie’ Dollar liable to remain under pressure.

Sterling

The Pound (GBP) stumbled yesterday, falling as investors reacted to comments from the soon-to-be policymaker Johnathan Haskel.

Mr Haskel asserted that he continues to see risks if the BoE raises rates too quickly, and that worsening global trade relations and the uncertainty of Brexit could pose a threat to the UK’s economy.

These statements significantly contrasted those of known hawk Ian McCafferty (who Haskel will be replacing in September), with investors now concerned that the Monetary Policy Committee will be losing a hawk and gaining a dove.

Today, investors will be keeping a close eye on a speech from BoE Governor Mark Carney, with his comments on the Financial Stability Report liable to push GBP up or down.

Euro

Very little went on yesterday in regards to data from the Eurozone. Instead, investors were focused on the back-and-forth between German Chancellor Angela Merkel and her coalition partners regarding the issue of migrant policy.

Investors are currently concerned that Mrs Merkel’s attempts to cobble together a Europe-wide deal will fall apart, undermining her leadership and potentially threatening political stability in Germany.

Today, markets will be keeping an eye on a speech from European Central Bank (ECB) Chief Economist Peter Praet, with any hints of policy direction capable of helping or hindering the single currency.

US Dollar

The US Dollar (USD) continued to ride a wave of economic optimism yesterday, bolstered by the recent surge in US manufacturing activity but limited later in the day by a contraction in consumer confidence.

On the data front, the US Dallas Fed manufacturing activity index stormed ahead to a score of 36.5 in June, up from the previous period’s 26.8 and the forecast of 24.9.

The consumer confidence reading, however, fell from a score of 128 to 126.4 in June, with consumers proving a bit more sensitive to the back-and-forth on trade and the tariff measures that have ensued.

Today, investors will be assessing the US durable goods orders results for May, as well as the advance goods trade balance (with both releases due in the evening).

Canadian Dollar

The Canadian Dollar (CAD) made a surprising recovery yesterday, supported by growing calm within equity markets and investor hopes regarding an upcoming speech from Bank of Canada (BoC) Governor Stephen Poloz.

Investors will be carefully waiting to scrutinise Mr Poloz’s speech, with any dovish or hawkish comments liable to shed light on whether a rate rise can be expected in July this year.

There are, however, ongoing concerns regarding global trade relations, the collapse of NAFTA renegotiations and the current strength of the ‘Greenback’, with all of these factors still keeping the outlook for the ‘Loonie’ bearish.

New Zealand Dollar

The New Zealand Dollar (NZD) traded narrowly against the majors yesterday, with the looming Reserve Bank of New Zealand (RBNZ) rate decision and trade balance readings keeping investors bearish.

Markets do not expect the RBNZ to raise interest rates on this occasion, and, to make matters worse, the nation’s trade surplus is expected to shrink from 253m to 100m.

If this occurs then we could see the ‘Kiwi’ Dollar continue to suffer against the majors as the week progresses.


Data Released

27th June 08:46 NZD New Zealand Trade Balance
27th June 11:00 NZD ANZ Activity Outlook
27th June 22:30 USD Advance Goods Trade Balance
27th June 22:30 USD Durable Goods Orders

Post by TorFX

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