Appetite for the Pound was soft yesterday, as markets continued to digest UK inflation data and await this morning’s retail sales figures. If the reports do show the forecast recovery in sales during June, this will ease fears that the UK economy will not have been able to rebound in the second quarter from the beginning of year slowdown. But should transaction volumes have remained weak, or even continued to contract, despite the fact price growth has moderated, this will bode ill for the UK’s consumer spending-fuelled economic expansion.
Construction output across the Eurozone posted a disappointing contraction on the month in May. After April’s 0.3% growth, output fell by a seasonally-adjusted -0.7%, taking the year-on-year output figure down from 3.3% to 2.6%. The Euro was weakened by a combination of poor data and strong risk appetite, which made the lower-yielding common currency less of an attractive buy. Anticipation ahead of today’s European Central Bank (ECB) meeting was helping pressure EUR lower, although today the Euro is making small advances ahead of the latest monetary policy announcements.
US Dollar (USD)
Once again, a lack of impactful data was helping to keep the US Dollar on the decline yesterday. Markets were also back to questioning the likelihood of President Donald Trump ever getting his tax and stimulus plans approved, after his replacement bill for Obamacare once again failed to secure support. The bill is now largely considered dead, which doesn’t bode well for the President’s other plans. Today, however, the US Dollar is on the rise after one of the world’s other leading safe currencies, the Japanese Yen, took a hit from a pessimistic Bank of Japan (BoJ) meeting. Japan’s policymakers left its stimulus intact and cut its inflation forecasts, prompting investors to switch from the Yen to the US Dollar.
Australian Dollar (AUD)
The Australian Dollar continued to surge higher on the back of the recent comments from the Reserve Bank of Australia (RBA). However, this morning’s labour market data for June has disappointed and finally prompted markets to take advantage of AUD’s current strength and sell for profit. The economy added 14,000 new jobs last month – missing forecasts by -1,000 – while May’s surge was revised lower by -4,000 to 38,000. This meant that unemployment had actually been at 5.6% for the past two months; earlier figures thought it was at 5.5%.
New Zealand Dollar (NZD)
Weak inflation data earlier in the week continued to hamper the New Zealand Dollar yesterday, although it made some modest gains versus many of its peers. Risk-appetite has started to wane today, with NZD falling against the majors as markets turn to safer assets, even if the potential for profit is lower. Tonight’s net migration figure could ignite the debate over immigration; some argue it is necessary for New Zealand’s economy, while others warn it is becoming a serious drain on public finances.
Canadian Dollar (CAD)
The Canadian Dollar received a boost yesterday from strong manufacturing shipments data, but the uncertainty surrounding the oil markets continues to weigh on the ‘Loonie’. Although US crude oil stocks fell by a much larger-than-forecast -4.7 million barrels in the week ending July 14th, oil prices remain significantly lower than the levels seen a few weeks ago.
This week the US Dollar was touching three-year highs when valued against a basket of major currencies. The greenback’s traditional role as one of the safe-haven currencies is helped by a domestic economy that is largely immune to the threats of the coronavirus.
Last update: 22 Feb, 2020
The strong start to the year for “risk-on” currencies is already a distant memory.
Posted: 3 Feb, 2020
The threat of a proxy war between the US and Iran in Iraq has pared back some of the recent gains of “risk-on” currencies.
Last update: 8 Jan, 2020