- Upbeat Commentary From RBA Governor Offered Limited AUD Support – Weakening investment lending dents economic outlook
- Pound Slumped to Fresh Lows as Brexit Worries Persisted – UK government reported to be planning for possibility of no deal Brexit
- Escalating Trade Tensions Benefitted US Dollar – Lower jobless claims likely to boost USD exchange rates further
- NZD Exchange Rates Shrugged Off Modest Contraction in Price Prices – ‘Kiwi’ braces for RBNZ announcement
Comments from Reserve Bank of Australia (RBA) Governor Philip Lowe sounded a rather upbeat note on the domestic outlook yesterday. However, AUD exchange rates failed to particularly benefit from Lowe’s commentary thanks to the disappointing nature of June’s home loans and investment lending data. Investors were particularly discouraged by the sharp -2.7% contraction in investment lending on the month, which highlights an increasing sense of caution within the domestic economy.
An uptick in the Chinese consumer price index may offer the Australian Dollar a boost this morning, however.
GBP exchange rates extended their downtrend further on Wednesday, remaining under pressure from market anxiety over Brexit. Reports that Theresa May’s cabinet is planning to meet in September in order to plan for the eventuality of leaving the EU without a deal accelerated the Pound’s decline. With a cliff-edge exit looking increasingly likely Sterling has fallen firmly out of favour with investors.
If the RICS house price balance shows an improvement within the UK housing market this could help to limit the vulnerability of the Pound today.
Demand for the single currency eased yesterday as investors lacked any major Eurozone data to drive sentiment. In spite of Tuesday’s solid German trade data confidence in the outlook of the Eurozone economy remains rather muted. The relative strength of the US Dollar continued to limit the potential of EUR exchange rates, especially as trade tensions between the US and China continued to ramp up overnight.
Fresh weakness may be in store for the Euro if July’s European Central Bank (ECB) Economic Bulletin fails to point towards increasing hawkishness among policymakers.
Another weekly contraction in MBA mortgage approvals was not enough to dent USD exchange rates overnight. The US Dollar instead found support from a fresh bout of market risk aversion, driven by the latest escalation in the US-China trade dispute. As Chinese officials announced plans to impose 25% retaliatory tariffs on US$16 billion of US goods investors were prompted to pile back into safe-haven assets.
If the latest US jobless claims figures point towards a further tightening of the labour market this could encourage the US Dollar to extend its gains.
An unexpectedly sharp slump in Canadian building permits did not give CAD exchange rates cause for confidence on Wednesday. With the housing market continuing to show signs of weakness optimism in the health of the wider Canadian economy diminished. The Canadian Dollar also came under pressure thanks to the latest decline in oil prices, with investors disappointed by a smaller-than-expected dip in US crude oil stockpiles.
Further evidence of a slowing housing market may put additional pressure on Canadian Dollar exchange rates tonight if June’s new housing price index falters.
New Zealand Dollar
As July’s ANZ truckometer reading saw a smaller contraction on the month this limited the softness of the New Zealand Dollar. Although inflationary pressure within the New Zealand economy is still failing to build as markets would like NZD exchange rates held onto a steady footing yesterday. Even so, with market risk appetite declining the ‘Kiwi’ struggled to find any upside momentum.
Signs of dovishness from the Reserve Bank of New Zealand (RBNZ) in its August policy announcement may return the New Zealand Dollar to a downtrend.
August 9th 07:00 NZD Reserve Bank of New Zealand Rate Decision 1.75%
August 9th 09:01 GBP RICS House Price Balance (JUL) 3.0%
August 9th 18:00 ECB European Central Bank Economic Bulletin (JUL)
August 9th 22:30 CAD New Housing Price Index (YoY) (JUN) 0.7%
August 9th 22:30 USD Continuing Jobless Claims (JUL 28) 1740k
Post by TorFX