Softer Dollar, Stronger Sterling

The Dollar drifted lower from elevated levels in yesterdays trade despite comments from Goldman’s that US inflation levels remain “well anchored” and risks of disinflation have eased. The Fed’s Harker commented that they could begin trimming their balance sheet in September to unwind the bond purchasing program of QE.

The Sterling gained as the BOE’s Haldane somewhat contradicted Carney’s comments earlier in the week by stating that that risks of raising rates too early have shrunk, citing strong growth and inflation numbers. Haldane, a former policy dove may bring the BOE to a split vote of 4-4 next MPC meeting in August giving Governor Carney the deciding vote. From Carney’s dovish comments earlier in the week he is likely to keep rates steady given the inherent political risk following the election and Brexit uncertainty.

Crude inventories came in lower than expected, however this did not help Brent futures which reached $45 per barrel, its lowest levels since November. This pushed the USDCAD through recent highs of 1.33. We have Canadian retail data out tonight and CPI figures tomorrow which could divert attention away from oil prices for the loonie.

The RBNZ kept rates on hold this morning as expected. Comments continue to point to neutral monetary policy for some time to come. After a brief spike of the flightless bird, trading has resumed back near the top end of its recent range.

Looking forward, we have a relatively quiet couple of days to end the week. Other than the aforementioned Canadian data we have US Unemployment Claims tonight which are expected to be flat, followed by a raft of European PMI data out on Friday.

Rakuten Securities Australia Review