Today's Highlights
GBP/EUR at a new 4 month high
IFS cautions UK over Brexit
Bank of Canada leaves interest rates unchanged
FX Market Overview
Yesterday marked another solid day for the Pound as the Sterling Euro exchange rate jumped to a new 4 month high of 1.3215 and Sterling Dollar rose close to the 2016 highs. This was despite better than expected economic data from the Eurozone and the United States. The Institute of Fiscal Studies cautioned that the UK could face 2 more years of austerity measures if the country voted to leave the EU, a prospect that investors assessed would convince more voters towards the Remain campaign. This has helped give the Pound a boost. Bookmakers have now slashed the chances of the UK leaving the EU to under 20%.
The Australian Dollar weakened overnight as Australia's first quarter capital expenditure survey showed that new Capex fell by 5.2% in the first quarter. Forward looking expenditure was slightly more positive but with the Reserve Bank of Australia focussing on inflation which is running well below target, there is a real risk that interest rates may be cut at the next meeting in a couple of weeks. July CPI will also be closely watched and the Australian Dollar is set to remain vulnerable in the short term.
Today we started with UK growth figures which as expected, came in at 0.4% for the first quarter. Consumer and investor confidence has certainly been affected by the upcoming referendum and a weaker reading could well have seen the Pound lose a little of its current lustre but, as the number was as expected, the Pound simply stalled after having rallied for a day or so. Fundamental data has been largely ignored owing to the EU vote and any move is likely to be short lived as markets await the results of the latest opinion polls and tonight's debate before taking on new positions.
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AUD/USD stalls ahead of Reserve Bank of Australia’s decision
The Australian Dollar registered minuscule gains compared to the US Dollar as traders braced for the Reserve Bank of Australia monetary policy meeting. A scarce economic docket in the United States and a bank holiday in the UK were the main drivers behind the “anemic” AUD/USD price action. The pair trades around 0.6624.
EUR/USD propped up near 1.0750 ahead of European Retail Sales
EUR/USD churned around 1.0770 to kick off the new trading week, with the pair rising after better-than-expected Purchasing Managers Index figures early Monday before settling into familiar chart territory above 1.0750 ahead of Tuesday’s pan-European Retail Sales figures.
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Gold price rallied close to 1% on Monday, late in the North American session, bolstered by an improvement in risk appetite due to increased bets that the US Federal Reserve might begin to ease policy sooner than foreseen. The XAU/USD trades at around $2,320 after bouncing off daily lows of $2,291.
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Ethereum holdings on centralized exchanges continue to decline despite recent whale sales. With Robinhood Crypto as the latest recipient of the SEC's Wells notice, Ethereum spot ETFs look more unlikely.
RBA expected to leave key interest rate on hold as inflation lingers
Interest rate in Australia will likely stay unchanged at 4.35%. Reserve Bank of Australia Governor Michele Bullock to keep her options open. Australian Dollar bullish case to be supported by a hawkish RBA.