- AUD Exchange Rates Recovered After Change in Prime Minister – ‘Aussie’ vulnerable if political infighting continues
- Solid Second Quarter German Growth Boosted Euro Demand – Weakening export volumes highlight fragile outlook
- US Dollar Dented by Surprisingly Sharp Durable Goods Orders Contraction – Markets discouraged by signs of weakening domestic demand
- Pound Softened as Brexit Deadline Pushed Back – Officials confirm that October deadline for agreement is no longer an option
Australia gained its fifth Prime Minister in as many years on Friday, with Malcolm Turnbull ousted from his position by Scott Morrison. However, as this may not be the end to the political infighting within the governing Liberal party the Australian Dollar remains vulnerable to any fresh turmoil. With the country looking on the verge of a fresh general election if Turnbull resigns from the House of Representative as anticipated AUD exchange rates may struggle to hold onto their modest recovery for long.
Downside pressure could also be in store for the Australian Dollar if trade tensions between the US and China continue to escalate this week.
An unexpected decline in UK mortgage approvals left the Pound generally lacking in support ahead of the weekend. With the domestic housing market still showing signs of a slowdown confidence in the wider economic outlook naturally dimmed. As Cabinet Office minister David Lidington indicated that October is no longer the deadline for the UK and EU to reach a Brexit agreement this put additional pressure on GBP exchange rates. With negotiations still failing to move forward significantly demand for Sterling naturally weakened.
GBP exchange rates may struggle to find any renewed support thanks to the UK bank holiday.
Confirmation that the German economy grew 0.5% in the second quarter offered encouragement to EUR exchange rates. This solid showing backed up the European Central Bank’s (ECB) positivity regarding the Eurozone’s economic outlook, even though the threat of increased protectionism and trade disputes remain. Although German export volumes failed to recover as far as forecast on the quarter this was not enough to drag the single currency down for the time being.
An improvement in the German IFO business sentiment survey is likely to give the Euro an additional boost against its rivals today.
USD exchange rates slumped during Friday’s European session after July’s durable goods orders figure saw a much sharper contraction than forecast. Investors were unsettled to find that orders had fallen -1.7% on the month, suggesting that confidence within the world’s largest economy is faltering. Coupled with the ongoing market unease surrounding developments around the Trump administration this left the US Dollar lacking in traction.
Even so, a stronger showing from tonight’s Chicago Fed national activity index may encourage investors to buy into the US Dollar again.
As markets awaited the latest comments from Bank of Canada (BOC) Governor Stephen Poloz support for the Canadian Dollar proved limited. Although oil prices posted their best week since June this was not enough to keep CAD exchange rates from softening heading into the weekend. With NAFTA renegotiations continuing to drag on under the shadow of fresh US tariffs on auto imports investor confidence remained muted.
Trade concerns are expected to remain a drag on the Canadian Dollar for the foreseeable future.
New Zealand Dollar
Although market risk appetite picked back up on Friday the New Zealand Dollar struggled to fully capitalise on the improvement in sentiment. An uptick in export volumes offered support to NZD exchange rates, however, as confidence in the domestic outlook improved. However, as US protectionism shows no signs of easing the New Zealand economy may struggle to sustain this growth.
As long as investors remain in a risk-hungry mood, though, this should limit the downside potential of NZD exchange rates.
August 27th 18:00 EUR German IFO Business Climate (AUG) 102
August 27th 22:30 USD Chicago Fed National Activity Index (JUL) 0.39
Post by TorFX