Weekly FX Wrap – US data disappoints as productivity and consumer spending weak; RBNZ cuts as expected; GBP still getting pressured
It was the RBNZ in focus this week, with a 25 bps cut priced in (and delivered), but with some outside calls for a 50 bps point surprise. The rhetoric was perhaps not as dovish as expected with governor Wheeler also stating that a 50 bps cut was not seriously considered. NZD moved both ways, but net unchanged at the end of the week. A buoyant AUD continued to probe higher, bolstered this week by Iron Ore printing 2 year highs - general antipodean demand helping AUD/USD reach a 3 month high of 0.7760.
Sticking with the commodity pairs, USD/CAD has sold off aggressively, as weak Canadian payrolls is swiftly forgotten. Oil price gains have been the major factor as the correlation has strengthened again, bolster MXN buying alongside the CAD. Once again, big hopes on OPEC meeting in September to discuss possible price and output freezes – they also released their monthly report this week which stated forecasts for demand increased to 94.26mln bpd vs previous 94.18mln bpd.
Looking towards Europe, SEK and NOK both saw improvements to their inflation figures and as a consequence both performed well against the EUR which may concern the Norges Bank and Riksbank respectively.
Cable this week saw some heavy selling pressure through 1.3000, with a view to testing the Brexit lows of 1.2789. EUR/GBP has already met this objective, tipping the July 6th peak .8624. EUR/USD continues to trade familiar levels, though remains more vulnerable to the upside in the wake of the disappointing US retail sales number. This compounded a tough weak for the greenback, which suffered on a notable fall in US Q2 productivity and a rise in wholesale inventory. USD/JPY followed in similar fashion, but still no sign of a break out from 100.00-102.50 as yet.
Next week sees UK, US and Canada report their inflation readings. This US reading is for Jul where the US Dollar Index has been relatively strong reaching its highest levels in 4 months. The RBA is also set to release its monetary policy statement, but produces little more from the corresponding meeting. Concerns over AUD strength the key focus from here. GDT price data is also due next week and WMP futures have been paid up significantly this week which suggest a positive number. NZD (and AUD) gains vs the USD looking overstretched, so perhaps more impact set for AUD/NZD. Japan will also release its prelim GDP results which often result in modest volatility at best. Other data points of note include UK retail sales and employment, German ZEW, as well as NZ and Australian employment.