Low volatility continues to characterize the Dollar, with the trade weighted index broadly unchanged since the G20 meeting on Saturday between US President Trump and his Chinese counterpart Xi Jinping. Despite both sides having agreed for now to postpone any further import tariffs and the release of ISM manufacturing PMI coming in slightly above expectations in June at 51.7, the Dollar remains stuck within a remarkably narrow 10-session range of only 0.15%.
The Euro weakened about 0.5% yesterday following dovish comments by two ECB Board members but has today recouped half its losses, with EUR/USD creeping back to 1.13. There has been no such rebound for Sterling, which in trade-weighted terms has weakened 0.4% today to its lowest level since mid-December with GBP/USD back below 1.26. Sterling has been hit in the past 24 hours by the release of very weak June data for the manufacturing and construction PMIs, further evidence that UK GDP growth likely slowed sharply in Q2 after an inventory-rebuild led pick-up in growth to 0.5% qoq in Q1.
The Australian Dollar has had a choppy 24 hours. The AUD/USD cross weakened yesterday (from 0.702) but recovered going into this morning’s Reserve Bank of Australia policy meeting (05:30 London time) – at which in line with expectations the RBA cuts its policy rate 25bp to 1.00%. It has since continued to slowly inch higher (to just short of 0.70) despite the RBA’s balanced statement and markets are still pricing in another 25bp rate cut this year.
