Euro Falls Out of Favour as Eurozone Trade Surplus Narrows

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  • Positive Chinese Data Shores up AUD Exchange Rates – Greater demand for emerging market currencies supports Australian Dollar
  • US Dollar Rebounds on Increased Consumer Confidence – Widening budget deficit fails to keep USD under pressure for long
  • Narrowed Eurozone Trade Surplus Knocks Euro Demand – Trade tensions continue to weigh on currency union
  • New Zealand Dollar Recovers Ground on Solid Manufacturing PMI – Strong service sector data could extend gains

Australian Dollar Boosted by Market Sentiment

Confidence in the Australian Dollar remained elevated on Friday even in the absence of any fresh domestic data. The continued recovery in emerging market assets helped to shore up the risk-sensitive ‘Aussie’ after the Central Bank of the Republic of Turkey’s (CBRT) decision to aggressively hike interest rates. Solid Chinese industrial production and retail sales data offered additional support to AUD exchange rates, meanwhile, in spite of lingering market worries over trade.

Any fresh demonstration of US protectionism could still dent the Australian Dollar in the near term.

BoE Comments Fail to Shore up Sterling

Demand for Sterling failed to pick up ahead of the weekend thanks to persistent jitters over Brexit. Comments from Bank of England (BoE) Governor Mark Carney were not enough to offer GBP exchange rates a boost, even though he highlighted the central bank’s preparedness for any Brexit eventuality. Investors were more concerned by Carney’s latest warning over the negative impact that uncertainty surrounding the UK’s exit from the EU has had on economic growth.

Unless Conservative MPs start to fall in line with Theresa May’s negotiating position the mood towards the Pound could deteriorate further.

Euro Wobbles After Eurozone Trade Surplus Narrowing

As the Eurozone trade surplus narrowed further than forecast on the month in July, diminishing from €22.5 billion to €17.6 billion the mood towards the single currency soured. This highlighted the pressure that the Eurozone economy has come under as a result of recent global trade tensions and the rise of protectionism. Naturally this left the Euro on a weaker footing against its rivals, with the European Central Bank (ECB) looking set to leave interest rates on hold for the foreseeable future.

Confirmation that the Eurozone inflation rate eased in August is likely to leave the single currency exposed to the downside today.

Mixed US Data Failed to Hamper US Dollar Recovery

After August’s monthly budget statement showed a significant widening of the deficit the US Dollar struggled to find traction against its rivals. US advance retail sales showed poor growth in August, meanwhile, as sales rose only 0.1% on the month. However, USD exchange rates managed to return to a positive trend during Friday’s European session as September’s University of Michigan sentiment index strengthened further than forecast.

As forecasts point towards a dip in the September Empire manufacturing index, though, the US Dollar could fall out of favour once again tonight.

Canadian Dollar Struggles to Find Fresh Traction

While support for the Canadian Dollar stalled on Friday this was not enough to prevent the currency from notching its best weekly performance in five months. With oil prices showing a modest recovery the downside pressure on CAD exchange rates eased, even as progress towards a NAFTA deal failed to materialise. A modest recovery in the US Dollar helped to prevent the Canadian Dollar finding any fresh gains, though, even after the general uptick in risk appetite.

If trade tensions between the US and Canada show fresh signs of flaring up this could drive CAD exchange rates sharply lower.

Modest Manufacturing Sector Growth Supports NZD

NZD exchange rates saw a modest boost from August’s New Zealand manufacturing PMI, which picked up from 51.2 to 52.0. As the sector remains in growth territory this offered some encouragement to investors, even though markets are still wary of the prospect of the Reserve Bank of New Zealand (RBNZ) cutting interest rates in the months ahead.

A similarly solid performance from this morning’s services PMI could give the New Zealand Dollar a stronger leg up against its rivals.

Data Released

September 17th 08:30 NZD Services PMI (AUG) 55.1
September 17th 10:00 EUR Eurozone Consumer Price Index (YoY) (AUG F) 2.0%
September 17th 22:30 USD Empire Manufacturing (SEP) 23.6

Post by TorFX

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