Euro Gains Ground in Spite of Softened German Inflation

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  • Decline in Copper Prices Weighed on Australian Dollar – Easing private sector credit may undermine AUD exchange rates further
  • Rising Consumer Credit Failed to Boost Pound Exchange Rates – Investors remain wary ahead of BoE rate decision
  • Weaker German Inflation Shrugged Off by Euro – Losses likely if Eurozone inflation also disappoints today
  • US Dollar Fell Further Out of Favour – USD volatility forecast on latest US personal consumption expenditure figures

Australian Dollar

A sharp decline in copper prices put pressure on the commodity-correlated Australian Dollar at the start of the week. Reports that Chinese demand for base metals is slowing weighed heavily on prices, given that China remains the world’s major metal importer. In the absence of any supportive domestic data this left AUD exchange rates on the back foot, with falling metal prices not boding well for the outlook of the Australian economy.

As forecasts point towards an easing in private sector credit growth on the year in June the mood towards the Australian Dollar may remain muted today.


While June’s UK net consumer credit and mortgage approvals figures bettered forecast this failed to give Sterling a significant boost against its rivals. As markets continue to brace for this week’s Bank of England (BoE) interest rate decision there were concerns that the increase in credit could deter policymakers. As some members of the Monetary Policy Committee (MPC) have expressed concern over elevated levels of household debt in the past the stronger data did not boost the odds of an imminent interest rate hike.

If the Gfk consumer confidence index holds steady on the month this is likely to have limited impact on GBP exchange rates.


A surprise easing in the German consumer price index was not enough to knock the Euro off a stronger footing on Monday. Investors continued to favour the single currency as inflation within the Eurozone’s powerhouse economy remains level with the European Central Bank’s (ECB) target rate of 2%. EUR exchange rates also benefitted from a better-than-expected Eurozone economic confidence index, which suggests that sentiment within the currency union remains resilient.

However, if the Eurozone consumer price index shows a similar weakening on the year the mood towards the Euro could sour.

US Dollar

Although US pending home sales saw a solid rebound on the month in June the appeal of the US Dollar remained limited. The volatile nature of the Trump administration continued to weigh on USD exchange rates, even as the focus has shifted away from international trade towards domestic politics. A decline in the Dallas Fed manufacturing index also gave investors incentive to sell out of the US Dollar overnight.

Further volatility is likely for USD exchange rates on the back of June’s personal consumption expenditure date, especially if inflation shows signs of easing.

Canadian Dollar

Rising oil prices supported CAD exchange rates yesterday as concerns over the global supply persist. With Brent crude trending above US$75 per barrel the appeal of the Canadian Dollar improved, even though the strength of the oil market remains fragile. A weaker US Dollar also helped to benefit CAD exchange rates, in spite of lingering uncertainties over the future of NAFTA and US-Canada trade relations.

A disappointing showing from tonight’s Canadian gross domestic product data may return the Canadian Dollar to a downtrend, though.

New Zealand Dollar

Market risk appetite supported NZD exchange rates yesterday, especially as the US Dollar came under renewed pressure. This helped to lift the New Zealand Dollar against its rivals even without the support of any domestic data. Even so, the ‘Kiwi’s gains appear distinctly vulnerable to any fresh shift in investor sentiment.

Any further weakening of the ANZ business confidence index could well drag NZD exchange rates lower today.

Data Released

July 31st 09:01 GBP GfK Consumer Confidence (JUL) -9
July 31st 11:00 NZD ANZ Business Confidence (JUL)  
July 31st 11:30 AUD Private Sector Credit (YoY) (JUN) 4.5%
July 31st 19:00 EUR Eurozone Consumer Price Index (YoY) (JUL) 2.0%
July 31st 22:30 CAD Gross Domestic Product (YoY) (MAY) 2.3%
July 31st 22:30 USD Personal Consumption Expenditure Core (YoY) (JUN) 2.0%

Post by TorFX

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