Brexit Fears Continue to Weigh Down Pound

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Headlines

  • Stronger Construction PMI Encouraged Australian Dollar Gains – RBA maintains neutral policy outlook
  • Brexit Worries Continued to Pressure GBP Exchange Rates – Rising house price index failed to benefit Pound
  • Euro Shrugged Off Underwhelming German Production Data – German trade surplus widened further than forecast
  • Canadian PMI Missed Forecast – Canadian Dollar slipped in spite of rallying oil prices


Australian Dollar

The Reserve Bank of Australia (RBA) offered no surprises, with interest rates now having remained on hold for the last two years. As policymakers appeared to maintain a cautiously optimistic outlook this did little to shift sentiment towards the Australian Dollar. However, AUD exchange rates benefitted from a strengthening in July’s construction PMI. As the index rose from 50.6 to 52.0 this signalled greater growth within the sector, boosting confidence in the underlying health of the Australian economy.

Commentary from RBA Governor Philip Lowe could prompt greater volatility for the Australian Dollar, though, if his tone proves more dovish in nature.

Sterling

Demand for the Pound remained weak on Tuesday, with markets still jittery over the prospect of the UK ending up without any Brexit deal. This kept GBP exchange rates under pressure in spite of an improvement in the Halifax house price index. While prices accelerated by an unexpectedly strong 1.4% on the month in July this failed to encourage any greater sense of confidence in Sterling. As Brexit-based uncertainty persists the impact of positive domestic data appears limited.

Political jitters are expected to keep the Pound on the back foot today, unless officials sound a more optimistic note regarding Brexit talks.

Euro

Weaker-than-expected German industrial production data did not dent the Euro yesterday, even though this adds to evidence of slowing growth within the Eurozone’s powerhouse economy. Investors instead focused on the more positive nature of June’s German trade data, which saw the trade surplus widen from 19.6 billion to 21.8 billion. Contrary to forecast, export volumes held steady on the month rather than contracting -0.4%. This offered a boost to the single currency even as global trade tensions continued to mount.

In the absence of any fresh Eurozone data, though, the Euro may struggle to hold onto a stronger footing.

US Dollar

Although June’s JOLTS job openings report showed an increase on the month the US Dollar trended lower overnight. USD exchange rates came under pressure thanks to the latest signs of escalation in the US-China trade dispute. Markets are concerned that China may begin to target the US service sector with any future tariffs, something which could have a greater detrimental impact on US growth. This prompted the US Dollar to fall out of favour, even as risk appetite diminished.

Ahead of Friday’s US inflation data the downside potential of USD exchange rates still looks relatively limited, however.

Canadian Dollar

The Ivey PMI disappointed expectations in July, slowing from 63.1 to 61.8 as Canadian economic activity eased. As a result, the Canadian Dollar slipped lower against its rivals during Tuesday’s European session. While the PMI remains firmly within the realm of expansion the decline was still enough to drag on CAD exchange rates. Even though oil prices rallied in response to the US re-imposing sanctions on Iran this failed to offer the Canadian Dollar any particular support.

With Canadian building permits forecast to show a contraction in June CAD exchange rates are likely to remain on a weaker footing.

New Zealand Dollar

A lack of change in the latest Global Dairy Trade auction prices did little to boost NZD exchange rates, following on from several consecutive sessions of falling prices. With confidence in the health of the New Zealand economy still limited the New Zealand Dollar failed to find any traction yesterday.

If domestic inflationary pressure shows signs of weakening in the ANZ truckometer this could extend the losses of NZD exchange rates further.

Data Released

August 8th 08:00 NZD ANZ Truckometer (MoM) (JUL) 
August 8th 13:05 AUD Reserve Bank of Australia Governor Lowe Speech 
August 8th 22:30 CAD Building Permits (MoM) (JUN) -1.2%

Post by TorFX

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