Sterling
Pound Sterling softened yesterday as markets were awaiting the outcome of Theresa May’s trip to Brussels, during which she was set to deliver her offer on the rights of EU citizens living in the UK. Confederation of British Industry (CBI) data showed that UK industry saw total order volumes grow to a 29-year high in June. This failed to boost Sterling, however, as markets are aware that the UK’s economic surveys have of late indicated better growth than official figures later show.
GBP is rising today after the EU dinner last night saw Theresa May promise to guarantee the rights of EU citizens already living in the UK; an amicable offering that removes a tension point between the two parties.
Euro
The Euro was on soft form yesterday after the release of the latest European Central Bank (ECB) Economic Bulletin, which delivered news both good and bad. The Governing Council noted that growth in the currency bloc was firming at an above-forecast pace, but also claimed there were no signs this was translating into inflationary pressures. Overall, the bulletin concluded that loose monetary stimulus was still necessary, giving markets little reason to change their outlook on the Euro.
US Dollar
There was little in the way of developments yesterday to particularly impact the US Dollar, so the ‘Greenback’ remained on sluggish form. Odds of another interest rate hike this year from the Federal Reserve were below the 50% mark and unemployment claims data was well within comfortable ranges, giving little to become excited about.
GBP/USD is likely to continue holding its strong gains against the US Dollar today, as markets will look past the upcoming Markit US PMIs to the speeches from Federal Reserve officials James Bullard, Loretta Mester and Jerome Powell.
Canadian Dollar
Strong retail sales figures drove the Canadian Dollar higher yesterday, even though the oil markets were still in a weakened state. Month-on-month sales grew 0.8% in April instead of the forecast 0.3%, while sales excluding autos rose 1.5% – over double the forecast rate of growth.
GBP/CAD is making strong gains today and Canadian inflation data this afternoon could see the Pound extend its gains further, as the figures are expected to show price growth slowed in May.
Australian Dollar
Although GBP/AUD was marginally in negative territory, elsewhere it was the Australian Dollar that was weakening. The turbulence on the global crude oil markets was weighing on risk-appetite. Weak oil prices will lower inflation across the globe, reducing the likelihood of central bankers hiking interest rates. This kept the risky ‘Aussie’ in low demand yesterday.
New Zealand Dollar
The New Zealand Dollar was on bullish form yesterday, racing higher after the latest Reserve Bank of New Zealand (RBNZ) monetary policy decisions. The RBNZ kept interest rates at their record low of 1.75% as expected, but their failure to explicitly take aim at the strength of the New Zealand Dollar boosted demand for the ‘Kiwi’. If policymakers do not think NZD exchange rates are too strong, they aren’t likely to take action in the near-term to weaken the currency, removing a major downside risk for the New Zealand Dollar and making it an attractive investment.
Data Released
13:30 CAD Consumer Price Index (YoY) (May) 1.5%
16:15 USD Fed’s Bullard Speaks about Monetary Policy in Nashville
17:40 USD Fed’s Mester Speaks in Cleveland
19:15 USD Fed’s Powell Speaks in Chicago on Central Clearing