USD on back foot as economic releases miss the mark, giving weight to Fed deferring next rate hike; BoE indicates easing bias; improved risk appetite

By Jason Wong

There’s been a mountain of economic data to digest over the past 24 hours and the net result is only modest changes in currencies, with the commodity currencies outperforming.

Commodity currencies are all higher, with the NZD, AUD, and CAD all up circa 0.4-0.6%. 

The USD is on the back foot, following a series of underwhelming economic releases which add weight to the view that the Fed will likely defer any possible rate hike until later in the year. 

In addition, the Bank of England indicated a bias to ease further, despite the economy proving to be in better shape than expected after the Brexit vote. 

All this has led to improved risk appetite, with good gains in equity markets, including a 1% lift in the S&P500, the VIX index retreating 12% to below the 16 mark, and a general lift in commodity prices.

The AUD is up 0.6% to 0.7510.  It fell after the labour market report showed lower than expected employment growth, but that response was slightly odd in the face of evidence of the unemployment rate continuing to track lower, and it is not surprising to see the currency rebound.

NZ GDP data didn’t offer up a positive surprise as many in the market anticipated, but the data were strong enough to give confidence in the state of the economy and confirmed NZ’s stronger growth picture compared to other developed countries. 

The NZD is trading not far off its highs for the session, and stands at 0.7315.  The currency is likely to remain range-bound over coming days as we await the BoJ, RBNZ and Fed meetings next week.

GBP is flat at 0.1% to 1.3240, falling 50 pips or so following the BoE announcement and crawling its way higher this morning.  EUR remains in the tight range it has traded all week and sits flat at 1.1240.  JPY trades close to the 102 mark.

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Daily exchange rates

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