- Trade War Jitters Stabilised on PBOC Comments – Australian Dollar recovered ground in spite of neutral RBA
- Sterling Encouraged by Stronger Construction PMI – Focus turns towards UK service sector data
- US Dollar Lost Momentum Despite Solid Domestic Data – Factory orders rebound failed to extend bullish run
- New Zealand Dollar Shrugged Off Disappointing Dairy Auction – Improved risk appetite benefits ‘Kiwi’
Although the Reserve Bank of Australia (RBA) offered no surprises to investors the Australian Dollar still rallied strongly yesterday. A general improvement in market risk appetite helped to shore up AUD exchange rates, with the US Dollar’s bullish run stalling. While significant concerns remain over the future of global trade comments from policymakers at the People’s Bank of China (PBOC) prompted market jitters to stabilise.
If May’s trade surplus widens as forecast this could see the Australian Dollar extending its gains further today.
The UK construction PMI unexpectedly improved in June, strengthening from 52.5 to 53.1 as the sector picked up momentum. Investors were encouraged to find that the construction sector has recovered from the slowdown seen in the wake of March’s disruptive weather, boosting hopes that the weakness was transitory in nature. This gave the Pound some support against its rivals, although Brexit-based worries continued to limit the upside potential of GBP exchange rates.
Another positive result from tonight’s UK services PMI may prompt Sterling to rally sharply, however, given the importance of the sector.
May’s Eurozone retail sales failed to rise as forecast, leaving the Euro on a weaker footing on Tuesday. Even though the latest Eurozone producer price index showed an unexpectedly strong uptick this was not enough to shore up the single currency. With the threat of a US-EU trade war still hanging over the domestic outlook investors saw little incentive to support the Euro, especially as German exports have already shown a slowdown in recent months.
Further losses could be in store for EUR exchange rates if June’s services PMIs also suggest that the Eurozone economy is struggling to regain its momentum.
While May’s US factory orders data showed a solid rebound on the month this was not enough to keep the US Dollar on a bullish run across the board. After the solid gains seen at the start of the week USD exchange rates came under pressure as Chinese officials downplayed the threat of a currency war. With markets taking a breather from trade war fears the appeal of the safe-haven US Dollar naturally declined.
As US markets close for Independence Day the US Dollar may struggle to regain any particular momentum in the short term.
The Canadian manufacturing PMI saw a solid uptick in June, strengthening from 56.2 to 57.1 as the sector continued to expand. CAD exchange rates capitalised on this positive showing, pushing higher overnight as confidence in the health of the domestic economy improved. With market risk appetite also recovering and oil prices picking up the Canadian Dollar found itself back in favour.
As long as trade war fears remain diminished CAD exchange rates are likely to remain on a stronger footing today.
New Zealand Dollar
NZD exchange rates shrugged off a sharp decline in prices at last night’s Global Dairy Trade auction, even though prices plunged 5%. Demand for the New Zealand Dollar persisted thanks to the wider sense of market risk appetite and a weaker US Dollar. As confidence in the outlook of the global economy improved the New Zealand Dollar benefitted.
Any deterioration in the ANZ commodity price index for June could dent the appeal of the ‘Kiwi’, however.
July 3rd 14:30 AUD Reserve Bank of Australia Rate Decision 1.50%
July 3rd 18:30 GBP Construction PMI (JUN) 52.5
July 3rd 19:00 EUR Eurozone Retail Sales (YoY) (MAY) 1.6%
July 3rd 23:30 CAD Manufacturing PMI (JUN)
July 4th 00:00 USD Factory Orders (MAY) 0.0%
Post by TorFX