July 22, 2019
The pendulum effect continues within market conditions as AUD retreats from recent highs against the Greenback and the S&P500 closes 0.6% lower on Friday. Gold pushed to a fresh six-year high and then suffered a 1.4% retracement and the Fed dampens speculation of a 50-basis point rate cut at its July meeting.
Key economic releases from across the globe this week include: US Q2 GDP growth, flash PMI, durable goods orders, and existing and new home sales; UK CBI factory orders and investors will likely react to the outcome of the Conservative leadership election. Markets also await Eurozone, Japanese and Australia flash PMI figures. The European Central Bank (ECB) policy meeting is likely to signal monetary easing as early as in September.
With very little first tier data this week out of Australia the Aussie dollar will be range-bound and impacted by data from other regions. Much of the AUD gains experienced against the US dollar in Friday’s trading session were reduced after a representative from the Fed Reserve confirmed that earlier comments by speaker Williams were ‘purely academic’ and not in reference to their short-term interest rate policy. Williams had previously suggested the Fed take a more aggressive monetary policy stance causing markets to react and begin to price in a potential 50 basis point cut at the Fed’s next policy meeting.
Against the Euro the Aussie dollar continues its move higher. It has risen to a two and a half-month high on the back of speculation that the ECB will look to cut interest rates next week.
Money market pricing of a 50-basis-point cut at the Fed’s policy meeting this month jumped to 70% last week but eased back to below 50% following Fed member Williams reassuring markets that his comments were academic and not about immediate policy changes. This resulted in a dollar positive rally. US-China trade talks continue to dominate and drive market sentiment. Risk appetite has improved somewhat and the market appears hopeful and is reflected in the unwinding of safe-haven positions in JPY and CHF.
The Great British Pound managed somewhat of a fightback last week. It had recently experienced a 27-month low against the US dollar and 6-month lows against the Euro. However, thanks to slightly more positive data in the form of UK retail sales, which surged 1% for the month of June beating expectations, the Pound has started to recover against most of its major counter parties. In addition, UK lawmakers passed a motion to ensure MPs sit in the House of Commons in the lead up to the October 31 Brexit deadline. This reduces the chances of the UK leaving the EU without a deal. GBP is far from out of danger and uncertain times lie ahead as the Brexit deadline fast approaches. The risk of a general election also looms.
The Aussie dollar has moved to two-and-a-half month highs against the Euro on speculation the ECB will look to cut interest rates at their next meeting. The Euro remains anchored near 2-year lows against the US the dollar on rising expectations of more quantitative easing in order to help the struggling Eurozone economy.
Rest of the World
Retail sales in Canada fell 0.1 % in May 2019, following an upwardly revised 0.2 % gain in the previous month missing market expectations of a 0.3 percent rise. This represents the first fall in retail trade in four months.
No First Tier Data
AUD – RBA Assist Gov Kent Speaks
JPY – BOJ Gov Kuroda Speaks
AUD – Flash Manufacturing PMI
AUD – Flash Services PMI
NZD – Trade Balance
USD – Existing Home Sales
USD – Richmond Manufacturing Index
USD – Flash Manufacturing PMI
USD – Flash Services PMI
EUR – Flash Manufacturing PMI
EUR – Flash Services PMI
EUR – M3 Money Supply
GBP – High Street Lending
AUD – RBA Assist Gov Lowe Speaks
USD – New Home Sales
USD – CORE durable goods Orders (Monthly)
USD – Goods Trade Balance
USD – Unemployment Claims
EUR – Monetary Policy Statement
EUR – ECB Press Conference
EUR – Main Refinancing Rate
EUR – German Import Prices
USD – Advance GDP (Quarterly)