- Australian Dollar Dragged Lower as Chinese Yuan Weakened – Risk aversion leaves AUD on softer footing
- Surprise UK Retail Sales Contraction Dented Sterling – Odds of August BoE interest rate hike diminished
- Strong Signs From US Economy Boosted US Dollar – USD exchange rates capitalise on rising trade tensions
- Canadian Dollar Weakened as Jobs Data Disappointed – Rising inflation may offer rallying point
A surprise increase in the participation rate in June kept the overall unemployment rate on hold, in spite of a sharp uptick in full time employment. This mixed bag of data left the Australian Dollar on a weaker footing against its rivals yesterday. Investors were also disappointed by a dip in the second quarter NAB business confidence index, which suggests that optimism within the domestic economy is faltering. As the Chinese Yuan fell to a one-year low against the US Dollar this put further pressure on risk-sensitive AUD exchange rates.
If markets remain in a jittery mood today this is likely to keep the Australian Dollar on a downtrend.
Confidence in the Pound plunged once again on Thursday, spurred by the unexpected contraction of UK retail sales on the month. As sales dipped -0.5% in June this undermined the odds of the Bank of England (BoE) raising interest rates at its August policy meeting. With the UK economy showing various signs of weakness this week the case for an imminent rate hike has diminished, cutting the odds of a move in August from 80% to 55%.
An uptick in June’s UK public sector net borrowing may put additional pressure on GBP exchange rates, especially if political worries continue to mount.
In spite of an absence of fresh Eurozone data the mood towards the Euro nevertheless picked up yesterday. EUR exchange rates benefitted from the relative weakness of many of the majors, with investors inclined to favour the single currency over its softening rivals. With market risk appetite limited the Euro was able to find some renewed support in the short term. Even so, the single currency remains vulnerable to fresh losses.
If the German producer price index shows an improvement, though, this could encourage EUR exchange rates to extend their trend higher heading into the weekend.
While worries over the global trade outlook mounted the US Dollar remained on a bullish run, in part thanks to the falling Chinese Yuan. Investors were also encouraged to pile into the US Dollar by better-than-expected leading index and Philadelphia Fed business outlook data. With the world’s largest economy still displaying signs of strength there was little reason not to favour USD overnight. A moderate increase in continuing jobless claims failed to dent USD exchange rates.
Comments from St Louis Fed President James Bullard could provoke volatility for the US Dollar, especially if he offers any signs of dovishness.
As the ADP payrolls report revealed its first decline of the year, showing a dip of -10,500, the Canadian Dollar came back under fire. Markets were not impressed to find that the labour market had failed to tighten further, especially as wider trade tensions continue to mount. Fears over the prospect of additional US tariffs look set to keep CAD exchange rates on a weaker footing for some time to come.
With forecasts pointing towards a modest uptick in June’s consumer price index the Canadian Dollar could find fresh demand tonight.
New Zealand Dollar
Diminishing market confidence left the New Zealand Dollar on a renewed downtrend yesterday, with investors still wary over the prospect of a further escalation in global trade tensions. A rising US Dollar also weighed on NZD exchange rates, as policy divergence between the Federal Reserve and Reserve Bank of New Zealand (RBNZ) looks set to widen further in the months ahead.
An increase in New Zealand credit card spending could help to shore up NZD exchange rates this morning.
July 20th 13:00 NZD Credit Card Spending (YoY) (JUN)
July 20th 16:00 EUR German Producer Price Index (YoY) (JUN) 3.0%
July 20th 18:30 GBP Public Sector Net Borrowing (JUN) 3.6 billion
July 20th 22:30 CAD Consumer Price Index (YoY) (JUN) 2.3%
Post by TorFX