The RBA Hits the Aussie as the Focus Shifts to the GBP and the EUR

The RBA talks of further rate cuts as the UK Tory Party Leadership race heats up. Stats out of the Eurozone will also be relevant later this morning.
Bob Mason
Currencies 10

Earlier in the Day:

It was a busier day on the economic calendar. Key stats included New Zealand 2nd quarter consumer sentiment figures and Australia 1st quarter house price numbers.

Outside of the stats, the RBA also released its RBA meeting minutes from the 4th June meeting, where the RBA cut interest rates by 25 basis points.

For the Kiwi Dollar

The Westpac Consumer Sentiment Index fell from 103.8 to 103.5 for the 2nd quarter.

The Kiwi Dollar moved from $0.64941 to $0.64946 upon release of the figures. At the time of writing, the Kiwi Dollar was up 0.05% to $0.6498.

For the Aussie Dollar

The Stats

The house price index fell by 3.0% in the 1st quarter, which was worse than a forecasted 2.5% decline. The house price index had fallen by 2.4% in the 4th quarter. According to the ABS,

  • All cities reported property price falls in the 1st quarter, with Sydney (-3.9%) and Melbourne (-3.8%) recording the largest falls.
  • Continued tight credit supply and reduced demand from investors and owner occupiers pressured house prices.
  • The total residential dwelling value fell by A$172.7bn to A$6.6bn in the quarter, marking a 4th consecutive quarterly decline.

The RBA Minutes

The RBA released its monetary policy meeting minutes this morning. According to the 4th June meeting minutes,

  • Risks from international trade disputes had increased and weighed on investment intentions in a number of economies.
  • International trade remained weak as a result.
  • The RBA noted that the outlook for the Australian economy remained reasonable, with the low-interest rate environment supporting the economy.
  • A pickup in growth in household disposable income, continued investment in infrastructure and a renewed expansion in the resource sector are to contribute to growth in the coming years.
  • Members expect the unemployment rate to decline towards the end of the forecast period. They also expect underlying inflation to pick up gradually, but to remain at the lower end of the target range in the next couple of years.
  • A rising labor force has offset reasonably strong demand for labor, leaving the unemployment rate higher than anticipated.
  • Spare capacity in the labor market is expected to remain for some time.
  • Wage growth remained subdued, with inflationary pressures also remaining subdued.
  • Members noted that further improvement in the labor market would be needed for wages and inflation to rise to the medium-term range.
  • While members agreed to a 25 basis point lowering of the cash rate, they also noted that it was more likely than not that a further easing in monetary policy would be appropriate in the period ahead.
  • The RBA considers developments in the labor market to be particularly important.

The Aussie Dollar moved from $0.6855 to $0.68433 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.16% to $0.6842.

Elsewhere,

The Japanese Yen was up 0.18% to ¥108.34 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s a busier day ahead for the EUR.

German and the Eurozone’s ZEW economic sentiment figures for June are due out later this morning. Later on in the day, the Eurozone’s finalized May inflation figures and April trade data will also be in focus.

Barring any material deviation from inflation prelim and forecasts, the market focus will likely be on Germany and the Eurozone’s economic sentiment figures.

Outside of the stats, the markets will also need to consider geopolitical risk and the U.S – China trade war will through the day.

ECB President Draghi will also be speaking, which will influence the EUR should there be any chatter on monetary policy.

At the time of writing, the EUR was up by 0.12% to $1.1232.

For the Pound

It’s also another quiet day ahead on the economic calendar.

There are no material stats due out of the UK later in the day.

A lack of stats will leave the markets to focus on today’s 2nd Tory Party leadership race ballot and 2nd live televised debate.

Boris Johnson continues to be favorite, which also continues to point towards a no-deal Brexit unless Johnson shifts on his stance.

While the focus will be on the 2nd ballot, BoE Governor Carney is also scheduled to speak. Expect the Pound to respond to any monetary chatter. Recent economic data suggests that the BoE may not be able to be as hawkish as initially suggested.

At the time of writing, the Pound was down by 0.05 to $1.2528.

Across the Pond

Economic due out of the U.S include May building permit and house start numbers. With the FED monetary policy decision and FOMC economic projections due out tomorrow, expect some Dollar sensitivity to the numbers.

Dire numbers could reflect a lack of confidence in the U.S economic outlook. It wouldn’t be the first time that the housing sector signaled a shift in economic conditions.

Outside of the numbers, U.S – China trade war chatter and chatter over Iran will also provide direction on the day.

At the time of writing, the Dollar Spot Index was down by 0.10% to 97.465.

For the Loonie

Canada April manufacturing sales figures are due out later this afternoon. We can expect the numbers to have an influence on the Loonie.

Outside of the numbers, market risk appetite and influence on crude oil prices will continue to provide direction.

Mixed economic data out of the U.S suggests that the U.S economy is also beginning to show cracks. Retail sales figures may have impressed, but the rest of the numbers have been poor. Demand for crude oil will need to weaken further, however, for the Loonie to really sink…

The Loonie was up by 0.05% to C$1.3406, against the U.S Dollar, at the time of writing.

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