Pound Gains Collapse as Pro-Brexit Ministers Resign

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Headlines

  • Risk Appetite Supported AUD Exchange Rates – Rising business confidence to boost Australian Dollar further
  • Cabinet Resignations Weighed Heavily on Pound Sterling – Markets spooked by prospect of fresh leadership challenge
  • Euro Momentum Limited After ECB Interest Rate Comments – President Draghi expects rates
  • Canadian Dollar Benefitted From Rising Oil Prices – Investors brace for BOC interest rate decision


Australian Dollar

With risk appetite on the up once again the Australian Dollar was encouraged to trend higher across the board on Monday. As markets continued to react to the underwhelming nature of last week’s US labour market data the higher-yielding AUD benefitted. While global trade tensions remain heightened this was not enough to weigh on investor sentiment at the start of the week, boosting the ‘Aussie’ even in the absence of fresh domestic data.

An uptick in the latest NAB business confidence index could offer AUD exchange rates additional support today.

Sterling

GBP exchange rates saw volatile movement yesterday as markets reacted to the softer Brexit plan that emerged from Friday’s crunch cabinet meeting. However, the subsequent shock resignations of Brexit secretary David Davis and foreign secretary Boris Johnson soon saw Sterling come under renewed pressure. Fears of a potential leadership challenge to Theresa May mounted in the wake of Johnson’s departure, giving investors little cause for confidence in the outlook of the Pound.

Today’s UK trade, production and growth data may encourage Sterling to return to a stronger footing, although politics are still likely to dominate focus.

Euro

Demand for the single currency remained rather limited even after German trade data bettered forecast. A solid rebound of 1.8% in May’s export volumes failed to boost the Euro against its rivals, even though this offers further evidence of the underlying resilience of the Eurozone’s powerhouse economy. Comments from European Central Bank (ECB) President Mario Draghi served to dampen sentiment overnight, with the policymaker indicating that interest rates will remain on hold until at least the second half of 2019.

With forecasts pointing towards a further deterioration of the German ZEW economic sentiment index the mood towards the Euro may struggle to improve.

US Dollar

Disappointment surrounding Friday’s jobs data continued to limit demand for the US Dollar, especially as market trade worries eased over the weekend. While tensions between the US and China remain elevated this was not enough to encourage investors to favour the safe-haven US Dollar. With the Federal Reserve looking likely to take a less aggressive approach to monetary tightening, thanks to the weak wage figures, USD exchange rates remained on a downtrend.

With June’s NFIB small business optimism index forecast to have dipped on the month the US Dollar may have trouble finding support today.

Canadian Dollar

Rising oil prices offered a boost to the Canadian Dollar, as signs pointed towards increased global demand and limited supply. Investors were also keen to buy into the ‘Loonie’ ahead of the Bank of Canada’s (BOC) policy meeting. With markets seeing high odds of BOC policymakers raising interest rates again this week CAD exchange rates were encouraged to push higher.

Another contraction in Canadian building permits could still dent demand for the Canadian Dollar tonight, though.

New Zealand Dollar

While the general improvement in market sentiment helped to support the New Zealand Dollar this still struggled to drive NZD exchange rates higher. As confidence in the outlook of the domestic economy remains limited there appeared little significant reason to favour the ‘Kiwi’ over its commodity-correlated cousins on Monday.

Any weakening in the latest ANZ truckometer is forecast to send NZD exchange rates into a slump, with signs of softer domestic inflation likely to discourage the Reserve Bank of New Zealand (RBNZ).


Data Released

July 10th 08:00 NZD ANZ Truckometer (MoM) (JUN) 
July 10th 11:30 AUD NAB Business Confidence (JUN) 8
July 10th 18:30 GBP Visible Trade Balance (MAY) -12 billion
July 10th 19:00 EUR German ZEW Economic Sentiment (JUL) -18
July 10th 20:00 USD NFIB Small Business Optimism (JUN) 105.8
July 10th 22:30 CAD Building Permits (MoM) (MAY) -0.5%

Post by TorFX

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