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Last week recap
United States Dollar
The US Dollar was one of the day’s worst performers Friday moving lower against all major counterparts as equities found support and risk appetite crept back into the market. Strength across European macroeconomic indicators and a dip in 10 and 2-year US treasury yields saw investors’ square positions. While risk appetite ebbs and flows, driving short-term volatility broader direction was driven by the growth and divergence in monetary policy platforms. Short-Term outperformance should be maintained while expectations for two 2018 rate hikes and three 2019 rate adjustments remain on the table.
Focus this week shifts to crucial Q2 Final GDP. CB Consumer Confidence and Core Durable Goods Orders are released on Tuesday and Wednesday respectively. Personal Spending and Chicago PMI from the States are released on Friday too.
USD / CAD
USD / CAD Expected Range:
The loonie was having a very difficult session versus the US dollar after Inflation and retails sales data misses on Friday saw the USDCAD spike to a new year high around 1.3382.
And then OPEC agreement came, oil jumped more than 4%, and the loonie reversed all of the losses to close in positive territory as USD suffered across the board. USDCAD dropped from the 1.33 highs to 1.3269.
Oil is opening weaker on Monday after more details around the OPEC agreement were defined during the weekend, as such the loonie is opening marginally lower versus the USD at 1.3292
EUR / USD
EUR / USD Expected Range:
A series of European PMIs released on Friday morning gave the single currency an early boost. It was the services element of the PMI that beat market expectations, while the manufacturing part printed slightly weaker than market forecasts. EUR/USD then drifted lower into New York opening but finished with a bit of a flourish as risk demand ebbed and flowed through the joint London/New York sessions.
Looking ahead to this week the EU Summit on 28th-29th June is likely to be the key market risk event. It will cover many controversial issues including European fiscal budget, the Italian budgetary risks, Brexit, and migration. Flash inflation data is also due for release later in the week.
GBP / USD
GBP / USD Expected Range:
It was a steady finish to the week on Friday. GBP/USD made some initial gains but then proceeded to fall back slowly through most of the day amid a lack of any significant UK economic data releases. Further trade threats were largely shrugged off by a market that seemed as though it was getting used to this kind of carry on. This time President Trump threatened to impose 20% tariffs on EU auto imports unless the EU removed tariffs on US auto imports.
The reaction hasn’t been entirely neutral this morning, however, as markets turn a little more risk-averse in the face of growing trade tensions and headlines over the weekend. The WSJ reported over the weekend that there might be further tariffs on Chinese imports on the way.
There isn’t a whole lot of data due out this week, at least as far as GBP/USD is concerned. BoE Governor Carney speaks on Wednesday and may or may not reference monetary policy. US Final GDP is then released on Thursday. It means that trade rhetoric and Brexit headlines will likely continue to dominate direction in currency markets.
AUD / USD
AUD / USD Expected Range:
The Australian dollar opened Friday morning skating on thin ice at 0.7375 and looked to recover from a weekly low of 0.7345, levels not seen since the corresponding period last year. Fortunately for the Aussie, a correction was seen during intraday trading and rallied through June 20 tops to close the week above the 74 US cent handle. A combination of both rising oil prices and rebound of commodity-based currencies supported moves higher.
A weaker than expected Manufacturing PMI reading on Friday evening in the United States allowed the Australian dollar to see a close of 0.7439 and take a breather from its current weakness on the currency markets.
With little on the domestic ticket this week, the AUD could continue potentially sustain upside movements in its march back towards US 75 cents assuming we can maintain above support levels at 0.7410. This week’s crucial United States GDP number mid-week looks to be the major macroeconomic driver as the Australian dollar dipped slightly lower on open and sits at current levels of 0.7419.
New Zealand Dollar
NZD / USD
NZD / USD Expected Range:
The New Zealand Dollar came under selling pressure last week falling to a fresh new 2018 low of 0.6854 on the back of increased trade war tensions between the US and China.
Looking ahead this week and the UK macroeconomic calendar is light with no relevant data releases until Wednesday which we will see the release of both Trade Balance report and ANZ Business Confidence. On Thursday will see the version of the Reserve Bank of New Zealand Interest Rate announcement where the cash rate is expected to remain on hold at 1.75%. Finally on Friday Building Consents for May.
From a technical perspective, the NZD/USD pair is currently trading at 0.6916. We continue to expect support to hold on moves approaching 0.6870 while now any upward push will likely meet resistance around 0.6960
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