- ‘Aussie’ Mixed on Commodity Slide – Support as Australian miners strengthen balance sheets.
- AUD/GBP Gripped by ‘Brexit’ Fears – No access to single market after EU split, Schäuble warns.
- AUD/EUR Holds Opening Levels – Positive economic data fails to shift bearish sentiment.
- NZD Slumps – ‘Kiwi’ harmed by commodity rout and poor card spending figures.
Australian Dollar
The Australian Dollar was mixed on Friday, with no domestic data and weak risk-appetite leaving the ‘Aussie’ without much support. All the main global commodity indexes were down, making the ‘Aussie’ vulnerable to advances from the Canadian Dollar and US Dollar. In more positive developments, further news of debt payoffs from Australian mining firms provided some tailwinds on the hopes that they would be in a stronger position to ride out another market slump, should one occur.
Chinese industrial and retail data today could see commodity currencies start this week on an uneven footing, although the first Australian data of note will be Tuesday’s consumer inflation expectation figure.
Sterling
AUD/GBP was bullish on Friday, despite positive UK data. Construction output saw a monthly rise of 2.5% on a seasonally-adjusted basis, while the decline in annualised output unexpectedly slowed to -3.7%, rather than accelerating from -4.5% to -4.9% as predicted. The consumer inflation expectation for the next twelve months also increased from 1.8% to 2%. ‘Brexit’ fears continued to weaken the Pound, however, with traders particularly concerned by comments from Wolfgang Schäuble. The German Finance Minister claimed that the UK would not be able to access the single market in the event of a split from the EU.
Tuesday’s UK Consumer Price Index is expected to show a mild uptick in year-on-year inflation, which could boost the Pound. However, with the UK’s referendum vote just around the corner, there is a significant possibility that even headline economic data could be overlooked. The Bank of England (BoE) meets on Thursday to discuss monetary policy, although again the approaching referendum vote means there is little expectation of action from the Monetary Policy Committee (MPC).
Euro
The Euro was mixed on Friday, with sizable losses against the Canadian Dollar and the Japanese Yen contradicted by bullish rises against Pound Sterling. Absent risk-appetite gave the Euro some strength, thanks to its safe-haven status, while further support was provided by the latest German inflation data, which mostly showed that consumer prices had remained steady. Wholesale prices rose significantly on the month compared to the previous reading, while French and Italian industrial production bettered the median market forecasts. The overall Euro picture remained bearish, however.
Eurozone industrial production statistics for April are set for release on Tuesday.
US Dollar
Safe-haven demand and a better-than-expected result from the University of Michigan Consumer Confidence index helped the US Dollar to trend bullishly on Friday. Concerns over the Chinese economy didn’t weigh particularly on the US asset, with very few believing they could have an adverse effect on the already dire chances of a rate hike from the Fed this week. The preliminary confidence score was expected to drop from 94.7 to 94, but instead only fell to 94.3.
Investors in the US Dollar will be focussed almost entirely on Thursday’s interest rate decision, with markets currently predicting just a 1.9% chance of tighter monetary policy.
Canadian Dollar
The Canadian Dollar was held back by risk-aversion, but nonetheless managed to trend bullishly after the latest round of labour market data on Friday. While the participation rate dropped slightly, the net change in employment printed at 13.8k, 10k above predictions, while unemployment surprised investors after it dropped from 7.1% to 6.9%.
Canada’s high-impact data rounds off the week, with Friday’s Consumer Price Index expected to show a small increase in inflation on the month, with yearly price growth forecast to tick marginally lower.
New Zealand Dollar
The markets were firmly in bear-mode on Friday, as evidenced by the fact that UK, German and Japanese ten-year bond yields all dropped to record lows. German bunds fell nearly 10 basis points to 0.021, taking the benchmark for Eurozone borrowing costs even closer towards negative yields. Weak risk sentiment wasn’t the only thing to drag on the ‘Kiwi’, however. Card retail spending unexpectedly fell on the month, declining -0.3%, while the previous figure was revised down to 0.8%.
Wednesday’s GlobalDairyTrade auction promises significant volatility for the New Zealand Dollar.
Data Released
June 14th 11.00 AUD Consumer Inflation Expectation (JUN)
June 14th 19.00 EUR Eurozone Industrial Production w.d.a. (YoY) (APR)
June 15th 22.00 NZD Dairy Auction Avg. Winning Price MT (JUN 15)
June 16th 04.00 USD Federal Open Market Committee Rate Decision (JUN 15) 0.5%
June 16th 21.00 GBP Bank of England Rate Decision (JUN 16) 0.5%
June 17th 22.30 CAD Consumer Price Index (YoY) (MAY) 1.7%