Draghi, Inflation, UK Politics and Trump Keep the EUR, USD and GBP in Focus

The Aussie and Kiwi Dollars were under pressure early off the back of weak numbers. Focus now shifts to Draghi, U.S inflation numbers and geopolitics…
Bob Mason
Currencies 10

Earlier in the Day:

Economic data was on the heavier side through the Asian session this morning. NZ electronic card retail sales, Australian consumer sentiment figures, and China inflation numbers provided direction.

For the Kiwi Dollar,

Electronic card retail sales fell by 0.5% in May, month-on-month, which was worse than a forecasted 0.7% increase. Card retail sales had increased by 0.6% in April.

According to NZStats,

  • The durables industry reported the largest decline in retail card spending, down by 0.8%.
  • Spending on grocery and liquor reported the 2nd largest decline, down by 0.4%.
  • There were also declines in spending on apparel and fuel industries, while there was no change in spending within the hospitality group.
  • Bucking the trend was spending on vehicles (excl. fuel), up by 0.9%.

The Kiwi Dollar moved from $0.65859 to $0.65832 upon release of the figures. At the time of writing, the Kiwi Dollar was down by 0.14% to $0.6573.

For the Aussie Dollar,

The Westpac Consumer Sentiment Index fell by 0.6% to 100.7 in June, reversing a 0.6% rise from May.

According to the latest Westpac report,

  • The family finances vs a year ago fell by 2.4% to 83.2. The sub-index continued to remain below the long run average 89.4.
  • Conversely, the family finances next 12-months rose by 3.1% to 107.0, supported by the latest RBA rate cut and tax cuts
  • Sentiment towards the economic outlook was mixed in June.
  • The economic conditions next 12-months sub-index decreased by 4.7% to 99.3, continuing to hold well above the average 90.9.
  • By contrast, the economic conditions next 5-years rose by 1% to 98.2.
  • On the consumer spending front, the time to buy a major household item index slipped by 0.2% to 115.5. The index continued to sit well below a long run average 127.3.
  • Weighed by negative sentiment towards the economy near-term, the unemployment expectations index jumped by 5.1% to 127.0, reversing the previous month’s decline. The long-run average stood at 130.0 in May.
  • From the housing sector, the time to buy a dwelling sub-index increased by 1.8% to 116.9, with the House Price Expectations Index surging by 22.7% to 109.7. Both sub-indexes sat below their long-run averages in June.

The Aussie Dollar moved from $0.69584 to $0.69566 upon release of the figures.

Out of China,

The annual rate of inflation picked up from 2.5% to 2.7% in May, which was in line with forecast. Month-on-month, however, consumer prices remained unchanged. Economic forecasts were for a 0.1% increase. The annual rate of wholesale inflation eased from 0.9% to 0.6%, which was in line with forecast.

The Aussie Dollar moved from $0.69539 to $0.6955 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.16% to $0.6951.

Elsewhere,

At the time of writing, the Japanese Yen was up by 0.04% to ¥108.48 against the U.S Dollar.

The Day Ahead:

For the EUR,

It’s a relatively busy day ahead for the EUR.

Finalized May inflation figures for Spain and French 1st quarter nonfarm payroll numbers are due out later this morning.

Barring a material deviation from prelim figures, the finalized inflation figures are unlikely to have an impact on the EUR.

Outside of the numbers, ECB President Draghi is scheduled to speak after the release of the Spanish inflation numbers. It remains to be seen whether Draghi delivers a blow to the EUR to reverse last Thursday’s gain…

Looking elsewhere, the market focus will remain on the Oval Office and any trade war chatter. There’s also the issue of Dollar strength to consider, which has moved back into the U.S President’s sights.

At the time of writing, the EUR was up by 0.02% to $1.1322.

For the Pound,

It’s a quiet day ahead.

There are no material stats due out of the UK today.

The lack of stats will leave the market focus on Parliament, the leadership race and Brexit chatter.

The Pound found support on Tuesday off the back support for a Labour Party move to block a no-deal Brexit. While the Pound found support, it was yet another demonstration of the lack of cohesion within the Conservative Party.

Michael Gove and other pro-remainers are reportedly looking to prevent a possible no-deal departure, which is a Boris Johnson proposal.

At the time of writing, the Pound was down by 0.07% to $1.2716,

Across the Pond,

It’s another relatively quiet day ahead on the economic data front, though we can expect Dollar sensitivity to the stats.

U.S May inflation figures are due out later this afternoon. We can expect the Dollar to respond to the numbers, with core inflation likely to have the greatest impact.

Outside of the stats, expect trade war chatter to continue to be an area of focus as the G20 Summit nears.

At the time of writing, the Dollar Spot Index was up by 0.02% to 96.701.

For the Loonie,

There are no material stats due out today to provide direction to the Loonie.

The lack of stats will leave market risk sentiment and today’s EIA crude oil inventory numbers in focus.

The Loonie was flat at C$1.3284, against the U.S Dollar, at the time of writing.

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