- Underwhelming Consumer Confidence Left AUD Exchange Rates Weak – Australian Dollar braces for labour market data
- Higher Inflation Unable to Boost Pound Sterling – Improved retail sales may shore up GBP
- Eurozone Trade Balance Forecast to Widen – Single currency looks for rallying point amid Turkey jitters
- US Dollar Benefitted as US Advance Retail Sales Bettered Forecast – Confidence in outlook of US economy remains solid
A modest uptick in the second quarter Australian wage price index was not enough to shore up the Australian Dollar yesterday. While signs point towards building wage pressures the mood towards the ‘Aussie’ soured in response to a disappointing Westpac consumer confidence index reading. Investors were not impressed to find that the confidence index had fallen -2.3% on the month in August, suggesting that domestic sentiment remains fragile.
This morning’s employment data could offer AUD exchange rates a boost, though, if the numbers point towards a tightening of the Australian labour market.
While the headline UK consumer price index strengthened in line with forecasts the Pound remained on a relatively weak footing against its rivals. As inflation once again outpaced average weekly earnings confidence in the outlook of the domestic economy diminished. Given the stagnant nature of the monthly CPI reading the data was not seen to particularly improve the case for the Bank of England (BoE) to tighten monetary policy further in the months ahead.
Further weakness may be in store for Sterling today if the latest UK retail sales data fails to show a rebound in consumer spending after June’s contraction.
The Euro struggled to recover ground lost to its rivals on Wednesday, especially in the absence of fresh Eurozone data. EUR exchange rates found some support as the Turkish Lira rallied, however, as worries over potential contagion faced by European banks diminished. Even so, it was not long before market jitters over the Turkish financial crisis put fresh pressure on the single currency, in part thanks to the bullishness of the US Dollar.
If June’s Eurozone trade balance figure shows a widening of the surplus this may encourage the Euro to make stronger gains.
Risk aversion continued to benefit the US Dollar overnight as political tensions between Turkey and the US showed no signs of thawing. The confidence of USD exchange rates was further boosted by the unexpectedly positive nature of July’s advance retail sales data. As sales strengthened 0.5% on the month this offered fresh encouragement to investors, suggesting that the outlook of the US economy remains strong. While production figures proved less positive this was not enough to dent USD exchange rates.
Another weaker showing from the Philadelphia Fed business outlook index could put some pressure on the US Dollar tonight.
A surprise increase in US crude oil inventories prompted the Canadian Dollar to trend lower across the board. Markets were unsettled by news that stockpiles had seen a major 6.8 million barrel increase on the week. This sharp uptick reignited investor concerns over the prospect of another global oversupply glut, given the recent signs of declining demand. As a result, CAD exchange rates slumped during Wednesday’s European session.
Confidence in the Canadian Dollar could recover, however, if June’s manufacturing sales show an improvement on the month.
New Zealand Dollar
Market worries and a bullish US Dollar were not enough to drive the New Zealand Dollar down yesterday. The risk-sensitive ‘Kiwi’ remained on a stronger footing against the majority of the majors, even in the absence of any supportive New Zealand data. Even so, the gains of NZD exchange rates still remained fragile.
As long as market risk appetite continues to deteriorate the New Zealand Dollar looks vulnerable to another round of selling.
August 16th 11:30 AUD Unemployment Rate (JUL) 5.4%
August 16th 18:30 GBP Retail Sales Ex Auto Fuel (YoY) (JUL) 2.7%
August 16th 19:00 EUR Eurozone Trade Balance (JUN) 18 billion
August 16th 22:30 CAD Manufacturing Sales (MoM) (JUN) 1.0%
August 16th 22:30 USD Philadelphia Fed Business Outlook (AUG) 22
Post by TorFX