Australian Dollar Edged Lower after RBA Minutes, Pound Soft on Brexit Worries

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Headlines

  • Australian Dollar Weakened as RBA Sticks to Guns in Minutes – Bank still appears some way off next rate hike
  • Growing Brexit Uncertainty Drives Sterling Lower – Sliding wage growth also drags on GBP
  • NZD Exchange Rate Soars in Wake of RBNZ Inflation Estimate – Underlying inflation surges in the year to June
  • US Dollar lifted by Upbeat Powell Testimony – Rebound in US industrial output also buoys demand 

Australian Dollar

Demand for the Australian Dollar remained limited yesterday, with the Reserve Bank of Australia’s (RBA) July minutes revealing a very neutral outlook from policymakers. The bank provided plenty of reasons why it would want to leave rates on hold this month. Unsurprisingly at the top of the list was current concerns over trade tensions between the US and China as well as Australia’s anaemic wage growth.

No major Australian data releases are scheduled for today’s session, but the Australian Dollar can be expected to steady as markets await Thursday’s jobs report.

Sterling

Brexit uncertainty and some lacklustre wage figures dragged on the Pound on Tuesday. A slight dip in UK wage growth left Sterling vulnerable at the start of the European session. Sentiment then tanked as markets were spooked by a marked uptick in Brexit concerns as Prime Minister Theresa May faced further rebellion from within her own party.

Sterling may rebound today, with an expected lift in UK inflation likely to help buoy market sentiment.

Euro

Trade in the single currency remained mixed on Tuesday, with a lull in economic data undermining any momentum in the currency. The resulting thin trading volumes left EUR exposed to movements elsewhere, with the single currency generally trending lower due to a buoyant US Dollar. 

The Euro may find some direction today, with the publication of the Eurozone’s latest inflation figures likely to prompt some reaction in the single currency.

US Dollar

The USD exchange rate was buoyed on Tuesday as, in a testimony in front of the Senate Finance Committee, Federal Reserve Chair Jerome Powell appeared upbeat about the continued growth in the US economy, while reinforcing the need to ‘keep gradually raising’ interest rates. The US session also saw the US Dollar spurred on by the latest US data release, with USD investors welcoming a rebound in US industrial production in June.

Powell’s testimony will continue again overnight on Wednesday, with movement in the US Dollar likely to remain focused on his outlook in the absence of any other notable data releases.

Canadian Dollar

Canada’s stronger-than-expected manufacturing sales figures also appeared to have minimal impact on CAD exchange rates on Tuesday. The Canadian Dollar also found little support from commodity markets, with crude prices remaining virtually unchanged and leaving the currency largely range bound through the session.

A continued lull in domestic data is likely to see the Canadian Dollar struggle on Wednesday, especially if a strong rise in US crude inventories prompts a drop in oil prices.

New Zealand Dollar

The New Zealand Dollar skyrocketed through Tuesday’s trading session. The humble ‘Kiwi’ appeared to be propelled higher by the Reserve Bank of New Zealand’s (RBNZ) latest underlying inflation estimate, which rose by 1.7% year-on-year in June. This helped to override New Zealand’s softer-than-expected headline inflation figure printed earlier in the session.

In the absence of any fresh domestic data today it remains to be seen if the New Zealand Dollar can sustain these gains, especially as market risk appetite begins to ease.

Data Released

July 18th 18:30    GBP    Inflation Rate(JUN)    2.6%
July 16th 19:00    EUR    Eurozone Inflation Rate (JUN)    2%
July 17th 00:00    USD    Powell Testimony    0.6%

Post by TorFX

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