Yesterday’s session saw major currencies including the Pound (GBP), US Dollar (USD), and Euro (EUR), all constrained to very tight trading ranges. Fresh fundamental news was thin on the ground and what was seen, including a worrying fall in Eurozone Retail Sales, was insufficient to rattle sentiment. US unemployment and average wage data due for release today could provide some fresh clues over whether the Federal Reserve will deliver on market hopes of a rate cut by the end of the month, while the Pound to New Zealand Dollar (GBP/NZD) exchange rate has also been posting some gains in recent days.
U.S. Market Holiday Keeps a Lid on Volatility
Foreign currency markets saw little movement yesterday, with the USA’s 4thof July holiday serving to dampen sentiment. Even the release of a shortfall in European Retail Sales for the year to May, which fell to just 1.3%, was insufficient to rock the Euro’s exchange rate, despite the news adding to calls for the European Central Bank (ECB) to provide fresh stimulus measures. The common currency held fast against both the US Dollar (EUR/USD) and British Pound (GBP/EUR) throughout the day, with both trading in very narrow ranges.
US Non-Farm Payrolls Data in Focus, USD/EUR, USD/GBP
The day ahead stands to be dominated by the release of highly influential US employment and wage data for June. Following Wednesday’s underwhelming ADP Payroll report, something of a shortfall may follow in terms of the number of jobs added. However as is increasingly the case, it’s the average wage data that the market will be following most closely. This has the ability to drive inflation, so a sluggish print here will likely lead to fresh calls from the Federal Reserve to take a more dovish view over interest rates. That could result in some softening of the US Dollar exchange rate against major currencies including the Euro (EUR/USD) and Sterling (GBP/USD).
Why Did it Move? Pound to New Zealand Dollar (GBP/NZD)
The Pound slipped to lows not seen in almost six months against the New Zealand Dollar (GBP/NZD) on Wednesday, but has since staged something of a recovery. With no fresh news emerging on the US-China trade talks after last weekend’s update, plus concern that the Reserve Bank of New Zealand (RBNZ) may need to accelerate the timing of its rate cuts, the Kiwi Dollar is falling from favour. Having traded as low as 1.8675 earlier in the week, the Pound to New Zealand Dollar exchange rate now sits at 1.8850.