Australian Dollar Pushes Higher in Spite of Tense G7 Summit

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Headlines

  • Resilient Australian Dollar Shook Off Global Trade Concerns – Weaker business confidence could undermine AUD exchange rates
  • Surprise UK Trade Deficit Widening Weighed on GBP – UK economy struggles to rebound after weak first quarter
  • New Zealand Dollar Pushed Higher in Spite of Weaker Manufacturing Sector – Signs of domestic inflation may boost NZD today
  • US-Canada Trade Relationship Continued to Deteriorate – Canadian Dollar weighed down as oil remains under pressure


Australian Dollar

Even though the G7 summit ended on a less-than-positive note over the weekend this failed to particularly weigh on the Australian Dollar at the start of the week. While the threat of a global trade war appeared to mount further, thanks to the protectionist attitude of the US administration, AUD exchange rates were able to hold onto a positive footing. Nevertheless, the position of the ‘Aussie’ remains rather fragile thanks to its risk-sensitive nature.

As the NAB business confidence index is forecast to show a slight dip on the month AUD exchange rates could return to a downtrend today.

Sterling

The mood towards the Pound soured once again on Monday thanks to the disappointing nature of the latest raft of UK economic data. Investors were not impressed to find that the visible trade deficit had unexpectedly widened in April, highlighting the economy’s continued vulnerability. In the absence of any progress towards a final Brexit agreement this encouraged GBP exchange rates to falter. Weak industrial and manufacturing data also limited the appeal of Sterling.

If April’s average weekly earnings figure suggests that wage growth has eased this could weigh heavily on the Pound.

Euro

A lack of fresh domestic data was not enough to prevent the Euro trending generally higher during Monday’s European session. Even though tensions between the EU and the US continued to escalate over the weekend EUR exchange rates remained on a positive footing. The threat of US-imposed tariffs on automobiles, on top of existing steel and aluminium tariffs, did little to discourage investors for the time being.

With forecasts pointing towards a sharp decline in the German ZEW economics expectations survey for June the Euro could struggle to hold onto a more optimistic mood.

US Dollar

Markets were not particularly impressed with the belligerent tone adopted by the Trump administration at the G7 summit. There are fears that this approach to trade could leave the US increasingly isolated. As the threat of a full-blown trade war appears to mount further investors remain concerned over the outlook of the world’s largest economy. This left USD exchange rates under pressure overnight, in spite of market jitters.

If the headline US consumer price index strengthens as forecast tonight, however, the US Dollar is likely to return to a stronger footing.

Canadian Dollar

Worsening relations between Canada and the US left the Canadian Dollar under pressure yesterday. A disagreement over the Canadian dairy sector prompted a falling out at the G7 summit, pushing CAD exchange rates lower over fears of further US action or tariffs. With oil prices still under pressure there was little in the way of support for the Canadian Dollar at the start of the week.

Trade worries are likely to continue to limit demand for the Canadian Dollar in the near term unless tensions show any signs of easing.

New Zealand Dollar

Even though the first quarter New Zealand manufacturing activity index showed a marked loss of momentum this failed to particularly impact the strength of NZD exchange rates. A weaker US Dollar gave investors incentive to buy into the New Zealand Dollar on Monday, even though concerns over the outlook of the global economy remain.

Any indication of rising inflationary pressure in May’s ANZ truckometer could give NZD exchange rates an additional boost today.

Data Released

June 12th 08:00 NZD ANZ Truckometer (MoM) (MAY) 
June 12th 11:30 AUD NAB Business Confidence (MAY) 9
June 12th 18:30 GBP Average Weekly Earnings (3M/YoY) (MAY) 2.5%
June 12th 19:00 EUR German ZEW Economic Sentiment Survey (JUN) -14
June 12th 22:30 USD Consumer Price Index (YoY) (MAY) 2.7%

Post by TorFX

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