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Pound Recovers as Political Jitters Wane, Australian Dollar Remains Supported by Risk-Sentiment

Pound News: GBP Rebounds as UK Political Jitters Ease

The Pound saw a strong recovery against major rivals like the Euro on Tuesday. The gains were largely caused by market perception that UK Prime Minister Theresa May was likely to keep her position even if she was challenged.

Sterling’s gains were limited though. Bank of England (BoE) interest rate hike bets remained mixed as the latest UK growth data was unsurprising and indicated that UK growth still relied too heavily on the services sector. Brexit jitters have left the future of the UK services sector uncertain.

The Pound could be in for further volatility if there are any surprising UK political developments today.

 

Euro News: ZEW Economic Sentiment Surveys Keep EUR Under Pressure

Investors had little reason to buy the Euro on Tuesday, aside from its negative correlation to the weak US Dollar (USD).

The day’s most notable Eurozone ecostats were ZEW’s July economic sentiment surveys, which all fell short of forecasts. German economic sentiment slumped from -16.1 to -24.7, while Eurozone economic sentiment worsened from -12.6 to -18.7.

Eurozone data is unlikely to influence Euro exchange rate movement today, so the shared currency will react to comments from European Central Bank (ECB) officials, as well as the strength of rival currencies.

 

US Dollar News: USD Remains Weak Despite Solid US Data

Despite most of Tuesday’s US data beating forecasts, risk-on movement and market concerns about US price pressures left the US Dollar unappealing and GBP/USD recovered from Monday’s lows.

The US NFIB business optimism index printed at 107.2 rather than the forecast 105.6, while May’s JOLTs job openings report came in at a higher than expected 6.638m.

The US Dollar could be similarly range-bound today and the day’s PPI and wholesale inventories starts could be overlooked as markets anticipate Thursday’s US inflation results.

 

Canadian Dollar News: Canadian Housing Data has Little Impact ahead of BoC Decision

Tuesday’s Canadian data had little impact on Canadian Dollar movement or the currency’s outlook, as investors continued to anticipate Wednesday’s Bank of Canada (BoC) policy decision. Canadian housing starts and building permits reports both beat forecasts on Tuesday.

However, speculation that the Bank of Canada could be planning to make a ‘dovish hike’ during its decision this week has left the Canadian Dollar unappealing and made it easier for GBP/CAD to advance.

 

Of course, today’s big event will be the aforementioned BoC decision, and the following press conference. If the bank looks to dim expectations for further interest rate hikes the Canadian Dollar is likely to weaken.

Australian Dollar News: AUD Benefits from Risk-On Rally

A lack of domestic support this week hasn’t stopped the Australian Dollar from being one of the markets most favoured risk-correlated currencies this week. The Australian Dollar continues to see resilient performance as investors seeking risky investments buy the currency back from its recent lows.

Tuesday’s Asian session saw the publication of June’s Australian business confidence stats from NAB, which fell short of forecasts with a result of 6. However, this did little to impact AUD.

Risk-sentiment will keep driving the Australian Dollar today, though some reaction from the morning’s Australian consumer confidence stats is likely too.

Upcoming Data

 

Wednesday, 11th July

01:30     Australian Consumer Confidence

02:30     Australian Home Loans

08:00     ECB Draghi Speech

13:00     US PPI

15:00     BoC Policy Decision

15:00     US Wholesale Inventories

16:15     BoC Press Conference

16:30     BoE Carney Speech

James Spurway

Currency Dealer

jas@fcgworld.co.uk

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