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July

Big week for Australian Dollar

Published: Monday 30 July 2018

  • US Dollar fails to strengthen from positive US Gross Domestic Product
  • North American Free Trade Agreement nearing conclusion – Canadian Dollar should strengthen
  • Big week for Australian Dollar
​​By David Johnson

In spite of stronger than expected US economic growth stats, the US Dollar failed to strengthen over the weekend. The GBPUSD rate is shackled to 1.31 and the EURUSD rate is similarly tied to 1.1650. The USD is stronger against the Chinese Yuan, though (a 13 month high in fact), but that has more to do with the Chinese authorities diligently weakening the currency. Whether this is for generalised competitive advantage or directed precisely at the US is an open debate, but the plan is very overt.
 
US discussions and data in focus this week
 
The US may be feeling a little left out tomorrow though; many of the world’s largest car producing nations will be meeting in Geneva to discuss defences against… I have such an urge to write ‘the dark arts’ at that point, but that isn’t it. They are discussing proposed US tariffs on vehicle imports. 
 
And sticking with the US, there appears to be progress on the North American Free Trade Agreement (NAFTA), which was described in Trump’s typically childlike words as “absolutely amazing” progress. If they do finalise a deal, the Canadian Dollar will benefit. Be prepared… Aye.
 
We will also get US employment data on Friday. There is an outside chance US unemployment will fall to 3.9%, a tremendous level and one we will hear a lot about from the president if it comes to pass. Before that, the US Federal Reserve will make its interest rate decision. There are few commentators who expect a change from the Federal Reserve, but their mood and sentiment will set the tone for the USD.
 
Pressure building for Pound breakout – be prepared
 
There is activity elsewhere, but the data is not exactly plentiful. This week’s highlights include the minutes and voting pattern from the last Bank of England (BoE) meeting as well as the bank’s inflation report.  Sterling is trapped in narrow channels against most currencies, but the pressure is building for a breakout and that is the focus of our attention; ensuring everyone has the risk covered on both sides of the market.
 
Important data due Down Under
 
The Australian Dollar will also be in the mix, with Aussie employment and earnings data due this week. The forecasters believe employment growth is slowing, but wage growth is accelerating and that will worry the Reserve Bank of Australia (RBA), if they are right, of course. We will also get trade balance and retail sales data from Australia, so there is plenty of scope for volatility in the Australian Dollar this week. 
 
Volatility likely
 
If you add in the fact that there is a month end mid-week, there is enough scope for significant volumes being pushed through the markets and that generally prompts volatility. 
 
Congratulations in order
 
And huge congratulations to Geraint Thomas, the first Welsh winner of the Tour de France; and well done too to Chris Froome for his third place. Both deserve medals after being spat at and jostled and having drinks thrown at them as they rode. Whatever your thoughts on Team Sky or them personally, that is just vile. 
On the seventh day
 
And on the seventh day, God created the duck-billed platypus and the Lord said, “That’ll give the Darwinists something to do.”

Today's Major Economic Releases

Market BST Data/Event Previous Expected
GBP 09:30 UK: Net Lending to Individuals 5.3b 5.3b
GBP 09:30 UK: M4 Money Supply 0.4% 0.6%
GBP 09:30 UK: Mortgage Approvals 65k 66k
USD 15:00 US: Pending Home Sales -0.5% 0.4%
NZD 23:45 New Zealand: Building Consents 7.1% 7.1%

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