Australian Dollar Pushed Higher Ahead of Employment Data

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Headlines

  • Improved Consumer Sentiment Boosted Australian Dollar Demand – Forecasts suggest steady unemployment rate
  • Markets Unimpressed by Steady UK Inflation Reading – Pound extended slump on worries over prospect of BoE rate hike
  • Euro Supported Ahead of European Central Bank Policy Announcement – Markets look for signs of increased hawkishness
  • Stagnant Food Price Index Failed to Dampen NZD Exchange Rates – New Zealand Dollar vulnerable to deterioration in market sentiment


Australian Dollar

Signs of strengthening Australian consumer sentiment encouraged AUD exchange rates to push higher on Wednesday. Both the latest Westpac consumer confidence survey and ANZ Roy Morgan weekly consumer confidence index showed a solid improvement, boosting optimism in the domestic outlook. However, as the general sense of market risk appetite diminished in anticipation of the Federal Reserve raising interest rates the Australian Dollar came under renewed pressure.

Volatility could be in store on the back of today’s Australian labour market data, even though forecasts point towards a steady unemployment rate.

Sterling

The mood towards the Pound remained bearish yesterday thanks to a steady UK consumer price index reading. Markets were disappointed that inflationary pressure showed no signs of picking back up, holding steady at a one-year low of 2.4% instead. This appeared to undermine the case for the Bank of England (BoE) to raise interest rates in August, particularly when coupled with Tuesday’s underwhelming wage data. As a result, GBP exchange rates remained on a downtrend.

Even so, if May’s UK retail sales figures point towards an uptick in consumer spending this could offer Sterling a rallying point today.

Euro

A weaker-than-expected Eurozone industrial production result did little to restore confidence in the economic outlook of the currency union. As signs suggest that the Eurozone struggled to regain any of its lost momentum in the second quarter the appeal of the Euro diminished. Even so, investors remain hopeful that the European Central Bank (ECB) is shifting towards a more hawkish policy outlook in spite of these signs of weakness.

If the ECB does adopt a more optimistic outlook in this evening’s policy announcement demand for the Euro may strengthen sharply.

US Dollar

As markets had already effectively priced in the impact of a June interest rate hike from the Federal Reserve this limited the potential of the US Dollar. USD exchange rates remained on a weaker footing throughout Wednesday’s European session, in spite of upward revisions to May’s finalised producer price index data. A contraction in the latest MBA mortgage applications figure did little to support the US Dollar, meanwhile.

As forecasts point towards a modest improvement in May’s advance retail sales data this may drive USD exchange rates higher tonight.

Canadian Dollar

US crude oil stockpiles saw an unexpectedly large drawdown on the week, offering a boost to the commodity-correlated Canadian Dollar. This weekly decline in US output helped to shore up the price of Brent crude, encouraging hopes that the market is not in store for another severe global supply glut. With market jitters over the global trade outlook easing somewhat CAD exchange rates strengthened.

Any disappointment from April’s Canadian new housing price index could drag the Canadian Dollar lower once again, however.

New Zealand Dollar

Even though the latest New Zealand food price index stagnated on the month this was not enough to weigh down NZD exchange rates. The relative weakness of the US Dollar helped to support the New Zealand Dollar ahead of the Federal Reserve’s June policy announcement. With markets in a less risk averse mood the New Zealand Dollar naturally benefitted.

In the absence of any fresh domestic data, however, NZD exchange rates could struggle to maintain any positive momentum in the near term.


Data Released

June 14th 11:30 AUD Unemployment Rate (MAY) 5.6%
June 14th 18:30 GBP Retail Sales ex Auto Fuel (YoY) (MAY) 2.5%
June 14th 21:45 EUR European Central Bank Rate Decision 0.0%
June 14th 22:30 CAD New Housing Price Index (YoY) (APR) 1.7%
June 14th 22:30 USD Advance Retail Sales (MoM) (MAY) 0.4%

Post by TorFX

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