Headlines
GBP/EUR Advances after Referendum –
Pares gains after Varoufakis resigns
Cable Trending at 1.55 –
US FOMC minutes ahead
Australian Dollar at 6-Year Low –
Grexit fears push the ‘Aussie’ lower
CAD/GBP Steady –
Canadian jobs data out this week
Sterling
Last week the Pound softened from a seven-year high against the Euro and an almost eight-month high against the US Dollar as UK Manufacturing data fell flat and the Bank of England’s (BoE) chief economist dampened interest rate hike expectations.
Although Sterling was able to recoup some losses before the weekend as the US Non-Farm Payrolls report disappointed and the UK Markit Services PMI showed a stronger-than-forecast rate of output, its gains against the Euro were limited ahead of Sunday’s Greek referendum.
The decisive anti-austerity victory initially sent the GBP/EUR pairing close to 1.42, but Sterling fell back to 1.40 after Greek Finance Minister Yanis Varoufakis handed in his resignation in hopes that the government will have more chance of negotiating a deal without him.
Influential UK data is lacking today so investors with an interest in the GBP/EUR, GBP/USD exchange rates will be focusing on Greece, the US ISM Non-Manufacturing Composite index and tomorrow’s UK Industrial/Manufacturing Production reports.
Euro
All the polls conducted in the lead up to Sunday’s referendum indicated that the vote would be a close run thing. However, the ‘No’ camp actually achieved more than 60% of the ballot.
As the outcome became known, the Euro registered declines against almost all of its most-traded currency counterparts.
While Greek PM Alexis Tsipras has claimed that a ‘No’ result would give him more power in negotiations, the nation’s lenders have made it clear that such an outcome would be taken as confirmation of the country’s desire to extricate itself from the currency bloc.
However, controversial Greek Finance Minister Yanis Varoufakis later helped the Euro recoup some of its initial losses by resigning his post. As negotiations were unlikely to progress with Varoufakis routinely abusing the nation’s creditors, this action was seen as a positive step forward.
The Euro trimmed its declines against both the Pound and US Dollar as the European session progressed on Monday, with slightly better-than-forecast German Factory Orders figures lending the currency a little support.
US Dollar
As last week’s US Non-Farm Payrolls report revealed an unexpected slowing in wage growth, investors revised their interest rate hike expectations accordingly and the US Dollar fluctuated prior to Friday’s Independence Day holiday.
However, with the situation in Greece driving demand for safe-haven assets, the US Dollar edged higher as markets reopened for a new week of trading.
Whether or not the ‘Greenback’ extends gains largely depends on how today’s ISM-Non Manufacturing Composite Index prints. The measure of the US Services Sector is believed to have risen from 55.7 to 56.4 in June.
An at or above-estimate result would be US Dollar supportive, but a below forecast number would add to the argument in favour of the Federal Open Market Committee leaving borrowing costs on hold and limit the ‘Greenback’s appeal.
Investors will also be looking ahead to the week’s most influential US release – the publication of minutes from the FOMC’s last policy meeting. Any hints of a September interest rate revision may send the US Dollar higher across the board.
The Canadian Dollar began the week trading in a stronger position against the Euro and US Dollar but down slightly against the Pound.
The GBP/CAD pairing advanced to a multi-year high last week in response to subpar Canadian GDP data, although the Canadian Dollar was able to recover ground before the weekend thanks to disappointing UK reports and an upbeat Manufacturing PMI from the RBC.
As always, oil price fluctuations will be having an impact on CAD trading over the course of the week, but today’s domestic Ivey Purchasing Managers Index, Wednesday’s Building Permits report and Friday’s employment numbers are also likely to cause Canadian Dollar volatility this week.
Any data which ups the odds of the Bank of Canada (BOC) introducing another rate cut this year would be ‘Loonie’-negative.
Australian Dollar
With demand for higher-risk currencies limited in the wake of the Greek referendum, the Australian Dollar dropped to a six-year low of 74.52 US cents against the US Dollar.
The AUD/GBP exchange rate was also trending around a 71-month low. Although the Australian Dollar has since recouped some of its initial declines, the commodity-driven currency will remain under pressure ahead of tomorrow’s Reserve Bank of Australia (RBA) interest rate announcement.
Just like its Australian counterpart, the New Zealand Dollar softened in response to the surprisingly decisive ‘No’ outcome to the Greek referendum.
The ‘Kiwi’ struck a fresh five-year low against the US Dollar and hit its lowest level against the Pound since September 2009. Slumping Chinese equities are also preventing the New Zealand Dollar from breaking free of its recent downtrend.
Data Released Today
09:30 EUR Euro-Zone Sentix Investor Confidence (JUL) Medium
15:00 CAD Ivey Purchasing Managers Index s.a. (JUN)
15:00 USD ISM Non-Manufacturing Composite (JUN)
15:00 USD Labor Market Conditions Index Change (JUN)