FX market outlookPosted on Tuesday, July 18 2017 at 8:22 am GMT+0000
As the Asian trading session was about to close, the US dollar was trending downward against most currencies on overnight news that the repeal of Obamacare is getting another push-back. The aussie rose following the release of the Reserve Bank of Australia’s minutes and the kiwi had a short tumble on the disappointing inflation figures.
The greenback tumbled against most currencies overnight on news that two more Republican Senators would oppose the healthcare reform bill unveiled by their party last week. The US currency weakened as the latest news cast another cloud over Trump’s presidency by spurring doubts on the White House’s ability to pass legislation. The dollar index, a broad measure of the greenback’s strength, was last trading at 94.80, down 0.35%. As the news broke, the dollar fell against the yen breaching the 112 level, however it recovered slightly to last trade at 112.26 yen. Euro/dollar shot above the 1.15 level, at a 14-month high of 1.1537, and was last trading at 1.1515.
Later in the session, closely monitored Germany’s forward looking ZEW investor sentiment survey for July will be released.
The release of the RBA’s minutes gave an additional push to the aussie against its US counterpart to reach a two-year high. The minutes confirmed the central bank’s positive take on the economy and that the RBA’s stance on the neutral rate is at 3.5%, indicating there is a lot of scope for more interest rate hikes. The RBA’s current cash rate is 1.5%. The yield on 10-year Australian government bonds increased 3 basis points to 2.76%. Aussie/dollar continued firming post the news to last trade at 0.7915.
The New Zealand dollar sank against the greenback in early hours of the session following the release of the disappointing inflation figures for the second quarter. Consumer inflation stagnated, quarter-on-quarter, which comes after 1% growth in the first quarter and below the expected level of a 0.2% gain. Annually CPI grew 1.7% in quarter to June-end, also below the prior period’s gain of 2.2% and below expectations of 1.9%. Kiwi/dollar tumbled to 0.7262 following the news, but managed to recover on US dollar weakness as the Asian session was about to close. The pair was last trading at 0.7353.
Apart this week’s impact from politics, sterling could move significantly following the release of June consumer inflation later in the day. The second round of negotiations around the UK’s exit from the EU has started yesterday and will last till Thursday. The pound was under some pressure against the US dollar yesterday, but remained above the 1.30 level for most of today’s trading.
Oil prices tumbled during the Asian session, following a drop during late Monday trading, as expectations for a monthly rise in U.S. shale-oil production helped to push prices back. WTI was last trading at $45.88 a barrel and Brent was at $48.32.
Gold prices continued gaining supported by dollar weakness. The precious metal has been trending upwards for the past three days and was last trading at $1,237.01 an ounce.