MORNING ROLL CALL

Jul 5 • Morning Roll Call • 77 Views • No Comments

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Aussie sells off as RBA fails to abandon dovish attitude, EU indices sell off, whilst Wall St was closed for July 4th

The Aussie sold off versus the majority of its peers, after the central bank (the RBA) announced that the interest rate was staying at 1.5%, but accompanied that revelation with a dovish narrative, in which they suggested any rise in rates, to temper inflation or consumer spending, will not be implemented in the short to medium term. Perhaps the recent contraction in construction permits data, suggested to the RBA that they have struck the right ‘cooling’ balance with their economic management, without the need for an interest rate rise. Retail sales have held up in Australia, rising by 0.6% in May.

AUD/USD closed the day down by circa 1% at 0.7601, reaching S3 at one stage, shortly after London opened. A similar pattern of losses was experienced versus the Aussie’s main peers, with AUD/CAD falling by over 1% to crash through S3, ending the day at circa 0.9830.

Moving onto Europe, the UK’s construction PMI courtesy of Markit was published and missed the forecast of 55, coming in at 54,8. Not a huge miss, but the trajectory has been down for some months, as inevitably many construction firms and builders are unwilling to take on fresh debt and projects with the uncertain political situation, both in terms of a minority government and Brexit. GPB/ USD fell by circa 0.3% to 1.2919, ending the day close to S1, after the currency pair’s eoght day rally finally ended on Monday.

In the Eurozone, producer price data provided the only other significant economic calendar news, coming in down -0.4% in May, as with several other recent releases, inflation fears appear to be receding in the single currency bloc. The euro experienced a mixed day on Tuesday; rising sharply versus the Aussie dollar, flat versus sterling and yen, down by circa 0.6% versus the Canadian dollar, with EUR/USD ending the day down 0.2% at 1.1346. STOXX 50 closed the day down 0.35%, CAC down 0.40%, DAX down 0.31%, and the UK’s FTSE down 0.27%.

The Canadian dollar experienced a rise versus the majority of its peers in direct positive correlation with the recent rise in oil, despite the manufacturing PMI for Canada falling to 54.7. USD/CAD ended the day down circa 0.6%, at 1.2933 close to S2, having at one stage breached S3, a nine month low. USD/JPY rose by circa 0.2% to 113.27 on the day after yen fell circa 1% versus the U.S. dollar on Monday. The Dollar Spot Index was little changed, after at one stage rising by 0.5% on Monday.

WTI (West Texas Intermediate) crude closed the day out up circa 0.2% at $47.17 a barrel, before the release of U.S data on Thursday, which is forecast to reveal a further reduction in the USA level of crude stockpile. Gold rose 0.2 percent to $1,222 an ounce, after dropping by circa 1.7% on Monday; registering its biggest loss of the year, during the U.S. dollar’s advance.

Economic calendar events for July 5th, all times quoted are London GMT time

07:55, currency impacted EUR. Markit/BME Germany Composite PMI (JUN F). The reading is expected to remain unchanged, month to month, at 56.1.

08:00, currency impacted EUR. Markit Eurozone Composite PMI (JUN F). A reading of 55.7 is forecast, no change from May.

08:30, currency impacted GBP. Markit/CIPS UK Services PMI (JUN). The prediction is for a slight fall to 53.5, from the 53.8 reading in May.

08:30, currency impacted GBP. Markit/CIPS UK Composite PMI (JUN). The expectation is for a fall to 53.9, from 54.4 in May.

09:00, currency impacted EUR. Euro-Zone Retail Sales (YoY) (MAY). The prediction is for a fall to 2.3% growth, from 2.5% in April.

14:00, currency impacted USD. Factory Orders (MAY). Orders growth is forecast to fall by -0.5%, from -0.2% recorded in April.

14:00, currency impacted USD Durable Goods Orders (MAY F) the expectation is for a fall to -1.1% in May.

18:00, currency impacted USD. FOMC Meeting Minutes (JUN 14). Currency investors will be looking for any forward guidance clues for a future rate rise, contained in the FOMC/Fed’s narrative when it’s published.

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