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July

More disappointment for Australian Dollar

Published: Friday 27 July 2018

  • Australian producer prices slow
  • Brexit Negotiations, round umpteen…ding ding
  • US Gross Domestic Product data awaited
​​By David Johnson

The big news yesterday wasn’t a forex one, Facebook shares lost 19% on the day after a growth warning from the company. That wiped a tear-inducing $120 billion off the value of the company. Insert sad face emoticon here.
 
In the foreign exchange markets, the Euro gained a little in the wake of the reduction of trade tariffs tensions between the US and EU. However, we saw a worrying sign this morning; French consumer spending took a dive in June and that will concern the European Central Bank (ECB). France is the second largest Eurozone economy after all.
 
Aussie Dollar weakens again
 
The Australian Dollar is a tad weaker this morning after weaker than expected producer price indices. Producer prices rose 1.5% in the year to June after a 1.7% rise in Q1. It certainly kills any calls for higher Australian interest rates and that reduced expectation of higher yields causes investors to seek a return elsewhere.
 
Brexit back in focus - will the Pound break free?
 
Today’s big events are the restarting of negotiations between the UK and EU over Brexit terms and the US economic growth data. On the Brexit side of things, the EU has done the obvious thing of pooh-poohing everything the UK Prime Minister has proposed. That’s what negotiators do; a fact that seems to evade the UK press. Sterling starts the day glued to €1.12 and $1.31, as it has been all week. Just like the weather, you can feel a storm brewing and a breakout in the value of the Pound is becoming more and more likely. The direction of that is the unknowable factor but preparation for risk managing it is simpler than you think. If you’d like some guidance on that for your needs, just let us know.
 
US growth data the big news today

On the US Side of things, the Gross Domestic Product (GDP) data is likely to confirm 5.2% annualised growth and that is, by global standards, very healthy indeed. Add in the potential for an agreement on the North American Free Trade Agreement (NAFTA) negotiations and the positive impact that will have on US trade with Canada and Mexico, and the US Dollar should have space to strengthen.
 
This is the end 
 
Oh and the end of the world is nigh… by the way. I thought I would mention it just in case they got it right this time. Tonight’s ‘Blood Moon’ which will be the longest eclipse of the 21st century (that is just 18 years though, before we all get carried away). Either way, some say – mostly crazy people – that this is the augury for the end of the world. The past form for people foretelling the end of the world, is not good, so we’ll probably still be here on Monday, but tonight’s sky should be a great spectacle.  Beware the moon... but have a great weekend.
 
So true
 
You know you're getting old when you stoop to tie your shoelaces and wonder what else you could do while you're down there.
 
George Burns (1896-1996)

Today's Major Economic Releases

Market BST Data/Event Previous Expected
USD 13:30 US: Advance Gross Domestic Product 2.0% 4.2%
USD 13:30 US: Advance Gross Domestic Product Price Index 2.2% 2.3%
USD 15:00 US: Revised University of Michigan Consumer Sentiment 97.1 97.1

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