Aussie Dollar gains on RBA change of tone
05/Aug/2015 • Currency Updates•
Some rare poor data in the UK economy could not halt a modest Sterling rally yesterday. The Pound appreciated by 0.1% against the US Dollar.
The Pound suffered a temporary dip during yesterday morning’s London session after some unexpectedly poor construction data for the UK economy. Growth in Britain’s construction industry slowed in July, with the latest flash PMI from Markit falling from 58.1 to 57.1, after a slight increase had been widely expected. The surprise slowdown is likely to reflect an easing of the surge in confidence among construction firms following from May’s general election result. According to the survey, housebuilding activity increased at its slowest pace since April and one of the weakest expansions since mid-2013. Construction firms also took on less staff last month, although the rate of employment in the industry remained above the long term historic average.
We’ll have more data from Markit today, with the latest services PMI. All eyes will, however, be on Thursday’s Inflation Report and MPC minutes from the Bank of England.
The Euro traded mostly within a narrow band for another day against its major peers yesterday. A lack of major announcements, and calm before a series of key releases later in the week, meant the single currency ended the London session 0.1% lower versus both the Dollar and the Pound.
Yesterday was another mostly quiet day in the Eurozone economy as far as economic indicator data was concerned. The only major data release of any note came from Eurostat with the latest producer price index. Prices received by domestic producers continued to decline, down by 0.1% for the month of June, 2.2% lower over the course of the year.
In Greece, banking stocks plunged for a second consecutive day after reopening following a five week closure on Monday. Stocks have now fallen roughly to the levels they were at in 1990, although still not as low as they were during 2012.
The Euro continues to trade under the radar this week, with focus elsewhere. The latest service sector growth and retail sales figures, to be released this morning at 9am and 10am respectively, however, could cause moderate Euro volatility.
The Greenback was mostly flat yesterday against its basket of currencies, with an absence of any significant news meaning volatility was at a minimum for much of the day. The US Dollar index finished 0.1% higher for the day.
The highlight of the day’s trading was the release of the latest factory orders data. According to the Commerce Department, new orders for US factory goods rebounded strongly in June after signs of strong demand for transport equipment. Orders increased by 1.8% on a month previous, having declined by 1.1% in May. This shows that, while the energy spending drag is easing, the negative effects of a stronger Dollar continue to constrain factory production.
Elsewhere, we saw a number of smaller, second-tier data releases. The economic optimism index from the Investor’s Business Daily, dipped slightly this month from 48.1 to 46.9. Meanwhile, ISM’s New York index, a summary of business conditions among manufacturers, impressed in July. The index climbed to its highest reading since January at 68.8, from a previous 63.1.
There are a number of economic releases to look out for in the US today. The employment change, trade balance, and service sector growth figures in the early afternoon may cause volatility in the Dollar. The main focus among traders, however, remains on Friday’s labour report.
Rest of the world
The Australian Dollar (AUD) was the biggest gainer yesterday, following a surprising change of tone from the Reserve Bank of Australia (RBA) in their latest monetary policy statement. The RBA toned down calls for further falls in AUD, dropping a reference to further declines being necessary. Governor Glenn Stevens has recently voiced a reluctance to cut rates again due to risks associated with an already hot housing market.