Euro Tumbles as German Business Confidence Hits Six-Year Low

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Headlines

  • Australian Dollar Dented by Underwhelming Business Confidence Index – Weaker consumer confidence could extend losses
  • Signs of Stronger UK Growth Boosted GBP Exchange Rates – Odds of BoE interest rate hike increase
  • German Economic Sentiment Slumped to Six-Year Low – Euro weighed down as outlook remains muted
  • Contracting New Zealand Prices Soften NZD – Signs continue to point towards weaker inflation



Australian Dollar

As the NAB business confidence index failed to strengthen on the month as forecast this left AUD exchange rates lacking in upside momentum. A slight dip in the latest ANZ Roy Morgan weekly consumer confidence index also put pressure on the Australian Dollar, giving investors little incentive to buy into the risk-sensitive AUD on Tuesday. With market risk sentiment also easing the Australian Dollar struggled to hold onto any particular traction against its rivals.

A similarly weak showing from today’s Westpac consumer confidence index may spur further AUD exchange rate losses.

Sterling

Confidence in the outlook of the UK economy strengthened yesterday thanks to a solid uptick in the NIESR gross domestic product estimate for the three months to June. The reading suggested that growth accelerated to 0.4%, rebounding solidly from the underwhelming 0.2% seen in the first quarter. Coupled with a similarly positive result from the first monthly estimate of GDP this helped to return GBP exchange rates to a stronger footing, boosting the odds of an imminent Bank of England (BoE) interest rate hike.

Any fresh escalation in UK political tensions could still weigh on Sterling today, however, if questions over Theresa May’s future mount.

Euro

The German ZEW economic sentiment index weakened further in July, with the headline figure slipping from -16.1 to -24.7 to hit a six-year low. This suggests that confidence within the Eurozone’s powerhouse economy is still muted, with concerns cited over the prospect of an EU-US trade war. While tensions have eased somewhat in recent days this was not enough to prevent the Euro trending lower on the back of the report.

Commentary from European Central Bank (ECB) President Mario Draghi may offer EUR exchange rates a rallying point today, provided his tone proves more hawkish.

US Dollar

June’s NFIB small business optimism index showed a smaller decline on the month than forecast, encouraging the US Dollar to return to a stronger footing. Signs from the US economy continue to point towards solid growth, even in the face of the uncertainty of deteriorating trading relations. A positive JOLTS job openings figure gave USD exchange rates further cause for confidence, suggesting that the labour market remains tight.

Any major revisions to the finalised US producer price index data could provoke some fresh volatility for the US Dollar tonight.

Canadian Dollar

CAD exchange rates failed to capitalise on an unexpectedly strong rebound in May’s Canadian building permits. While the domestic housing market showed signs of improvement, however, this failed to encourage any particular strength for the Canadian Dollar. The mood towards CAD remained somewhat wary ahead of tonight’s Bank of Canada (BOC) policy decision, in spite of high expectations for an interest rate hike.

If the BOC pulls the trigger and raises interest rates once again the Canadian Dollar may push higher across the board.

New Zealand Dollar

Investors were not impressed to find that the ANZ truckometer had contracted -1.5% on the month in June, raising fresh concerns over the domestic inflation outlook. While retail card spending showed an improvement this was not enough to overshadow the poor inflationary data. With price pressures looking set to remain muted for some time to come the appeal of the New Zealand Dollar was naturally limited.

In the absence of any fresh data today NZD exchange rates may remain under pressure, particularly if market sentiment sours.


Data Released

July 11th 10:30 AUD Westpac Consumer Confidence (JUL) 
July 11th 17:00 EUR European Central Bank President Draghi Speaks 
July 12th 00:00 CAD Bank of Canada Rate Decision 1.50%

Post by TorFX

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