Brexit Worries Continue to Weigh on Pound Sterling

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Headlines

  • Australian Dollar Struggled for Direction – Stronger construction PMI may encourage market confidence
  • Hawkish BoE Commentary Failed to Boost Pound – Investor focus remains on Brexit developments
  • German Factory Rebound Shored up Euro Rates – Confidence in underlying health of Eurozone economy improves
  • USD Exchange Rates Softened in Anticipation of Jobs Data – Weaker labour market may dent US Dollar demand



Australian Dollar

Thursday proved to be relatively uneventful for the Australian Dollar, with a lack of fresh domestic data limiting the momentum of AUD exchange rates. As markets braced for the latest set of Federal Open Market Committee (FOMC) meeting minutes the Australian Dollar struggled to find any particular momentum. With the US and China preparing to implement tariffs against each other ahead of the weekend the mood towards the ‘Aussie’ remains muted at best.

A stronger showing from the latest Australian construction PMI could offer some support to AUD exchange rates today, however.

Sterling

Comments from Bank of England (BoE) Governor Mark Carney encouraged bets that the central bank is on track to raise interest rates in August. As Carney expressed confidence that the economic slowdown seen in the first quarter was due to adverse weather conditions this boosted market optimism in the domestic outlook. However, the latest business warnings over Brexit kept the Pound on the back foot yesterday.

Developments at the crunch cabinet meeting on Brexit could prompt further volatility for GBP exchange rates tonight.

Euro

German factory orders saw a strong rebound in May, rising 4.4% on the year to better forecasts. This suggests that the Eurozone’s powerhouse economy is in a better state of health than previously thought, boding well for growth moving forward. A sharp boost to the latest German retail PMI also helped to shore up demand for the Euro, even though concerns remain over the possibility of a US-EU trade war.

A similarly positive showing from May’s German industrial production data could encourage the single currency to push higher still.

US Dollar

Demand for the US Dollar was a little muted overnight, in spite of June’s ISM non-manufacturing composite index proving stronger than anticipated. While the US economy continues to demonstrate signs of robustness worries persist over the potential negative impact that the Trump administration’s protectionist measures could have on domestic growth. A weaker-than-expected ADP employment change figure also dampened the mood of USD exchange rates.

If June’s non-farm payrolls report also suggests that the labour market is struggling to tighten further the US Dollar could fall out of favour.

Canadian Dollar

Oil prices proved rather volatile yesterday thanks to a tweet from Donald Trump and an unexpected increase in the latest US crude oil inventories data. With US stockpiles continuing to rise the mood of the oil market turned bearish, with investors still concerned by the prospect of a fresh oversupply glut. This helped to drag the Canadian Dollar lower, especially given the recent souring of trade relations between Canada and the US.

Tonight’s Canadian labour market data is likely to provoke further jitters for CAD exchange rates, particularly if wage growth falters as forecast.

New Zealand Dollar

Even in the absence of any fresh domestic data the New Zealand Dollar managed to push higher across the board on Thursday. This was largely thanks to markets calming in anticipation of the latest Fed communication and US jobs data as investors adopted positions. Although concerns over the outlook of the global trading economy remain this was not enough to limit NZD exchange rates at this stage.

Any deterioration in market risk appetite is likely to drag the New Zealand Dollar lower, though.


Data Released


July 6th 08:30 AUD Construction PMI (JUN) 
July 6th 16:00 EUR German Industrial Production (YoY) (MAY) 1.5%
July 6th 22:30 CAD Unemployment Rate (JUN) 5.8%
July 6th 22:30 USD Change in Non-Farm Payrolls (JUN) 195,000

Post by TorFX

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