Pound Sterling (GBP)
Towards the close of last week the British Pound fared well versus most of its peers, rising to multi-month highs in response to EU referendum polls suggesting ‘remain’ will be victorious. Better-than-expected Consumer Confidence in May also spurred Sterling gains, although confidence remains historically low as ‘Brexit’ uncertainty has not fully abated. With an absence of influential domestic data today, the Pound is generally holding steady versus most of its peers. Business Confidence dropped to a three-year low but the data had minimal impact on GBP exchange rates.
The combination of improved Federal Reserve rate hike bets, US Dollar strength and speculation of stimulus expansion from the European Central Bank (ECB) weakened the Euro considerably last week. The prospect of widening policy divergence and uncertainty with regards to the fallout from a potential ‘Brexit’ has significantly dampened demand for the single currency. However, positive German labour market data today enabled a slight rebound, albeit a fractional one. German unemployment unexpectedly dropped from 6.2% to 6.1% in May, with joblessness reduced by 11,000. This positive data wasn’t enough to provoke a marked Euro uptrend but has prevented further depreciation.
US Dollar (USD)
After Federal Reserve Chairwoman Janet Yellen stated that a near-term benchmark interest rate was now ‘appropriate’ the US Dollar surged versus its peers. Whilst Yellen did still stress the need for caution with so many geopolitical uncertainties, traders now believe that the Federal Open Market Committee (FOMC) will view changes to policy as being far more data dependent. As a result, the US Dollar is likely to see significant price swings depending on the outcome of key data events. Today’s Consumer Confidence report is likely to be one of those closely monitored by traders, with a positive result likely to provide a platform for a ‘Greenback’ (USD) rally.
Australian Dollar (AUD)
The prospect of a near-term Fed rate hike and the resultant plunge in Gold prices weighed heavily on the ‘Aussie’ (AUD) last week. Today’s European session has seen risk sentiment reversed, causing the high-yielding Australian Dollar to make marked gains versus its major peers. The improvement in risk-appetite can be linked to rising Asian stocks with particular reference to the Shanghai Composite Index and the Hang Seng Index. Also supportive of ‘Aussie’ gains was mostly positive domestic data which saw Building Approvals and Private Sector Credit better estimates.
New Zealand Dollar (NZD)
Much like its Oceanic neighbour, the improvement in risk-appetite caused the New Zealand Dollar to appreciate versus most of its peers. Losses versus AUD can be linked to uninspiring domestic data. Furthermore, with increased speculation of policy intervention from the Reserve Bank of New Zealand (RBNZ), the prospect of widening policy divergence with the Federal Reserve has limited NZD gains.
Canadian Dollar (CAD)
In response to strong Middle Eastern production, oil prices dropped back below $50 a barrel. This prevented the Canadian Dollar from appreciating despite increased demand for high-yielding assets in the early stages of Tuesday’s European session. Comparative US Dollar strength also reduced the appeal of the ‘Loonie’ (CAD). In the early stages of the North American session, however, CAD weakness was driven by mixed results from Gross Domestic Product data. Quarterly growth outpaced expectations but March’s monthly GDP contracted by more than forecast.