- Threat of Political Upheaval Continued to Punish AUD Exchange Rates – Australian Dollar remains vulnerable
- Stronger UK Retail Sales Failed to Boost Pound Sterling – Investors remain preoccupied with prospect of no deal Brexit
- Confident ECB Minutes Shored up Euro – Weaker German growth may dent single currency today
- New Zealand Dollar Softened Ahead of Trade Data – Forecasts suggest fresh decline in export volumes
Politics continued to dominate sentiment towards the Australian Dollar on Thursday as former Home Affairs Minister Peter Dutton prepared to launch a second leadership challenge. With Prime Minister Malcolm Turnbull’s position still looking decidedly fragile confidence in the ‘Aussie’ naturally diminished. The latest escalation in trade tensions between the US and China also put pressure on AUD exchange rates, with market risk appetite deteriorating in response to the latest US trade tariffs.
The Australian Dollar is unlikely to recover ground today as markets continue to brace for the potential political upheaval that would follow a fresh leadership challenge.
While the CBI reported retail sales index saw an unexpected jump on the month, signalling resilient consumer spending, this failed to buoy the Pound against the majority of its rivals. The underlying details of the survey indicated that business optimism is continuing to weaken, with much of the growth in retail sales attributed to the influence of the summer heatwave. Investors reacted poorly to the government’s no deal Brexit technical notes, meanwhile, as worries over the prospect of a hard exit continued to mount.
A modest slowing in UK mortgage approvals for July could see Sterling weaken further today.
Confidence in the Euro generally picked up on Thursday as markets reacted to the contents of the European Central Bank’s (ECB) July meeting minutes. As the central bank expressed confidence in the health of the Eurozone economy and indicated that uncertainties surrounding the inflation outlook are receding this encouraged investors to pile into the single currency. While an interest rate hike is still unlikely to come until the latter half of 2019 EUR exchange rates still benefitted from the minutes.
Even so, confirmation that the growth of the German economy eased in the second quarter may dent the Euro ahead of the weekend.
The hawkish nature of the Federal Open Market Committee (FOMC) meeting minutes encouraged the US Dollar to return to a bullish trend. With the odds of a September interest rate hike approaching a near-certainty USD exchange rates recovered their strength once again. Although US housing market data disappointed overnight, as well as the latest manufacturing and services PMIs, this was not enough to drag on the US Dollar at this stage.
However, if July’s durable goods orders figure contracts on the month as forecast this could take some of the steam out of USD exchange rates tonight.
Oil prices failed to maintain their bullish trend overnight as the impact of the better-than-expected US stockpiles figure faded. This eroded some of the support of the Canadian Dollar, especially in the face of a wider decline in market risk appetite. Even so, CAD exchange rates were still able to capitalise on the weakness of some of the commodity-correlated currency’s weaker rivals.
Unless markets see further progress towards a successful conclusion to NAFTA renegotiations the mood towards the Canadian Dollar could sour further.
New Zealand Dollar
Demand for the New Zealand Dollar eased yesterday in the wake of the hawkish Fed meeting minutes, as policy divergence between the US central bank and the Reserve Bank of New Zealand (RBNZ) looks set to widen. As trade relations between the US and China continued to deteriorate NZD exchange rates came under increased pressure.
Hopes are not high for this morning’s New Zealand trade data, with forecasts pointing towards a widening of the trade deficit. Another deterioration in export volumes could weigh heavily on the New Zealand Dollar.
August 24th 08:45 NZD Trade Balance (JUL) -400 million
August 24th 16:00 EUR German Gross Domestic Product (YoY) (2Q F) 2.0%
August 24th 18:30 GBP BBA Loans for House Purchase (JUL) 40,500
August 24th 22:30 USD Durable Goods Orders (JUL P) -0.5%
Post by TorFX