Australian Dollar Soft After Turnbull Sees Off Leadership Challenge

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Headlines

  • Political Jitters Remained Despite Turnbull Surviving Leadership Challenge – Australian Dollar struggles to shake off domestic worries
  • Improved UK Public Sector Borrowing Boosted GBP – Brexit uncertainty continues to cast shadow over domestic outlook
  • Trump Attack on Federal Reserve Policy Dented US Dollar – Markets concerned by prospect of increased political pressure on policymakers
  • Surprise Fall in Wholesale Sales Dragged CAD Exchange Rates Lower – Weaker Canadian retail sales could extend decline


Australian Dollar

As Prime Minister Malcolm Turnbull survived a leadership challenge this encouraged a greater sense of confidence for the Australian Dollar. However, the initial relief of this averted major political upheaval fast faded as a number of ministers tendered resignations from the front bench. This prompted AUD exchange rates to come under renewed pressure, with the relative fragility of Turnbull’s position highlighted. Investors were also discouraged the Reserve Bank of Australia’s (RBA) latest set of meeting minutes.

Any sign of economic improvement in the Westpac leading index could still offer the Australian Dollar a fresh boost today.

Sterling

Although August’s CBI industrial trends orders survey found that factory orders had softened more significantly than forecast this failed to keep Pound Sterling on the back foot for long. While worries remain over the strength of the economic outlook investors took heart from a better-than-expected public sector net borrowing figure. As the UK posted a fiscal surplus of 2.8 billion in July, the strongest figure for the month since 2000, demand for the Pound naturally strengthened.

However, political developments relating to Brexit could drag on GBP exchange rates today as negotiations continue.

Euro

Greece’s long-awaited emergence from its eight-year bailout programme did little to shift the mood of the single currency overnight. Worries remain over the future of the Hellenic republic, especially as the government remains tied into an array of creditor-mandated policies for decades to come. As credit rating agency Moody’s opted to postpone its review of Italy this offered some support to Euro exchange rates, though.

With anticipation mounting ahead of the release of the European Central Bank’s (ECB) meeting minutes tomorrow the single currency may struggle to push higher in the near term.

US Dollar

Confidence in the US Dollar crumbled after the White House launched another attack on the Federal Reserve, expressing discontent over rising interest rates. While Trump’s disapproval is unlikely to deter Fed policymakers from continuing to tighten monetary policy over the coming months investors were spooked by this display of political pressure. If the Fed comes under further fire for increasing interest rates this could keep USD exchange rates on the back foot.

Ahead of tonight’s Federal Open Market Committee (FOMC) meeting minutes the appeal of the US Dollar is likely to remain muted.

Canadian Dollar

A surprise contraction in June’s wholesale trade sales data prompted the Canadian Dollar to trend lower once again. The -0.8% decline in sales on the month undermined confidence in the underlying health of the Canadian economy. As worries over the likelihood of NAFTA talks continuing to drag out mounted this left CAD exposed to downside pressure, even as oil prices remained on a positive footing.

If retail sales figures for June prove similarly disappointing the Canadian Dollar could see its losses extend further.

New Zealand Dollar

While monthly credit card spending saw a sharp decline of -1.1% in July this failed to weigh down the New Zealand Dollar yesterday. Markets instead took encouragement from the solid nature of the yearly figure. A general increase in risk appetite also helped to bolster NZD exchange rates, with the faltering US Dollar offering support to its antipodean rival.

As forecasts point towards an uptick in second quarter retail sales the New Zealand Dollar may find further cause for confidence this morning.


Data Released

August 22nd 08:45 NZD Retail Sales Ex Inflation (QoQ) (2Q) 0.3%
August 22nd 10:30 AUD Westpac Leading Index (MoM) (JUL) 0.1%
August 22nd 22:30 CAD Retail Sales (MoM) (JUN) -0.2%
August 23rd 04:00 USD Federal Open Market Committee Meeting Minutes

Post by TorFX

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