Daily Afternoon Report 13.07.2016
The dollar extended losses against the other major currencies on Wednesday, with no major U.S. data expected throughout the day and as investors remained focused on upcoming central bank meetings.
GBP/USD held steady at 1.3252, just off a two-week high of 1.3336 hit overnight.
U.K. political instability concerns continued to ease, as Interior minister Theresa May was set to become Britain’s prime minister on Wednesday.
But the pound remained under pressure amid mounting expectations for a rate cut from the Bank of England at the conclusion of its policy meeting on Thursday.
The BoE could potentially cut interest rates to fresh record lows and step up quantitative easing measures to cushion the U.K. economy from the fallout from Brexit.
BoE Governor Mark Carney said on Tuesday that any negative consequences from the Brexit vote on the U.K. economy could prompt the central bank to act, fuelling expectations for more stimulus measures.
USD/JPY slipped 0.27% to 104.42, off the previous session’s two-and-a-half week highs of 104.98, while USD/CHF declined 0.60% to 0.9832.
The yen pared losses posted after Japanese Prime Minister Shinzo Abe’s ruling coalition increased its majority in the upper house in parliamentary elections on Sunday.
The win for Abe’s coalition fed hopes for a fresh package of stimulus measures to spur economic growth.
EUR/USD gained 0.48% to 1.1114.
The Australian dollar edged higher, with AUD/USD up 0.10% at 0.7630, while NZD/USD held steady at 0.7301.
Earlier Wednesday, official data showed that China’s exports declined by an annualized rate of 4.8% in June, while imports dropped 8.4%.
China is Australia’s biggest export partner and New Zealand’s second biggest export partner.
Elsewhere, USD/CAD dropped 0.53% to 1.2975, pulling away from Monday’s five-week highs of 1.3140.
At the conclusion of its policy meeting on Wednesday, the Bank of Canada held its benchamark interest rate at 0.50% in a widely expected move.
In its monetary policy report, the central bank said inflation in Canada is on track to return to 2% in 2017 and that growth should continue to pick up, although the implications of the Brexit vote are highly uncertain and difficult to forecast.
Market participants were still eyeing a press conference by the BoC due later in the trading session.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.45% at 96.11.