• Dollar is dipped by Obama
  • Sterling slides on CBI
  • Watch the emerging market canary
  • Volatility expected down under

Despite the obvious frustrations coming from the Greek situation, euro has remained largely on the front foot following comments that President Obama had concerns that the US dollar may be overvalued. Attempts to row back those comments were unsuccessful yesterday and the greenback has maintained a weak posture overnight. It’s as if Friday’s payrolls announcement never happened.

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GBP is the only G10 currency that has been unable to gain against the dollar overnight after the Confederation of British Industry downgraded its estimates of the UK economy through 2016. While the reductions in expected UK output were relatively minor – down 0.1% this year and next – the negativity speaks to wider concerns around the impact of an EU referendum.

Tomorrow night’s Mansion House speech from Bank of England Governor Mark Carney and Chancellor George Osborne is also an obvious signpost for GBP. Last year’s saw Carney surprise markets with the line, “rates could be raised sooner than markets currently expect.” We doubt a similar bomb will be dropped on sterling this week, given the longer term need for a drive higher in inflation.

Despite that gaffe by Obama, dollar remains at strong levels against emerging markets assets, highlighted by the sell-off in Turkish lira following Sunday’s elections, the Brazilian real coming lower on governmental spending cuts and wider Asian currencies getting hit following a poor Chinese inflation measure. The IMF warned last week that the Federal Reserve should postpone rate rises until next year in a bid to try and protect the uneasy balance that we have in markets at the moment. Emerging markets are where the canaries live for these issues – rising currency volatility, bond yields and credit default swap prices are all likely in the coming year.

Yesterday saw the dollars of Australia and New Zealand decline as traders once again positioned for poor data and a central bank rate cut respectively. Thursday morning will see both the latest jobs data from Australia and the June rate decision from the Reserve Bank of New Zealand. Calling these currencies has been a pain in recent weeks with the labor market data from Australia particularly volatile. I can easily see a RBNZ rate cut, however, and a lower NZD as a result.

EURUSD is marginally higher this morning following those Obama comments but finds itself in a holding pattern courtesy of Greece. Interest will pick up again on Thursday as we get inflation numbers from France and retail sales from the US.

GBPUSD is still trending around the 1.53 level but dovish pressures expected from Carney on Wednesday can easily see this back towards the 1.52 range lows.

USDCAD is coming lower this morning following a decent run higher in oil prices.

AUDUSD is starting to recover from yesterday’s lows as some of the USD pain drips out of the market and traders remember the payrolls announcement last Friday. All eyes on Thursday’s jobs numbers.