Pound Losses Ease in Anticipation of Stronger UK GDP

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  • Global Trade Tensions Kept Australian Dollar Under Pressure - Little support expected from RBA Quarterly Statement
  • New Zealand Dollar Plunged as RBNZ Revised Policy Guidance - Interest rates set to remain on hold into 2020
  • Sterling Steadied as UK House Price Balance Improved - Stronger second quarter GDP to boost GBP exchange rates today
  • USD Rates Extended Uptrend Ahead of Inflation Data - Odds continue to favour September Fed rate hike

Australian Dollar

Escalating global trade tensions prompted the Australian Dollar to trend lower on Thursday, in spite of the Chinese consumer price index picking up in July. While the Chinese inflation rate bettered forecast this was not enough to eclipse resurgent market concerns over worsening US-China trade relations. As investors saw little reason to favour risk-sensitive assets this left AUD exchange rates on the back foot once again.

Reaction to the Reserve Bank of Australia (RBA) Quarterly Statement on Monetary Policy looks set to prove limited today, with no surprises likely at this stage.


After several days of decline the Pound found a floor yesterday as selling pressure finally eased. Worries remain over the prospect of the UK leaving the EU without any new deal in place, however, limiting the potential for GBP exchange rates to recover. An improvement in the RICS house price balance offered some support to Sterling, meanwhile, as the UK housing market picked up momentum in July.

A greater rallying point could be in store for the Pound this afternoon if the second quarter UK gross domestic product doubles on the quarter as forecast.


The European Central Bank (ECB) Economic Bulletin failed to boost demand for the Euro. As the central bank reiterated warnings over the negative outlook for global growth in the face of rising protectionism this soured the mood of investors. With the ECB looking set to leave monetary policy on hold for the foreseeable future the upside potential of EUR exchange rates remains limited.

With no fresh Eurozone data set for release today the single currency is expected to lack any particular momentum heading into the weekend.

US Dollar

While the latest US jobless claims figures proved mixed this was not enough to knock the US Dollar off its bullish trend. Markets remain confident that the US labour market is continuing to tighten, keeping the Federal Reserve on track to raise interest rates at its September meeting. With market risk appetite declining this offered additional support to USD exchange rates, even though any further Chinese tariffs could negatively impact the US economy.

An uptick in tonight’s US consumer price index data may encourage the US Dollar to make fresh gains against its rivals.

Canadian Dollar

The Canadian housing market continued to demonstrate signs of weakness overnight, with July’s housing starts figure and June’s new housing price index both showing declines. Although confidence in the outlook of the Canadian economy remains somewhat limited CAD exchange rates still benefitted from an increase in oil prices. As the oil market recovered from the previous day’s weakness this helped to boost the Canadian Dollar against its more vulnerable rivals.

As forecasts point towards a dip in July’s unemployment rate CAD exchange rates could strengthen further this evening.

New Zealand Dollar

As the Reserve Bank of New Zealand (RBNZ) unexpectedly revised its guidance on interest rates NZD exchange rates plunged. Markets were caught off guard as Governor Adrian Orr indicated that the RBNZ expects to leave rates on hold ‘through 2019 and into 2020’, leaving the New Zealand Dollar exposed to fresh losses. This more dovish outlook could keep NZD exchange rates under pressure for some time to come.

Even if July’s manufacturing PMI proves positive this may not be enough to shore up the New Zealand Dollar.

Data Released

August 10th 08:30 - NZD    Manufacturing PMI (JUL)    
August 10th 11:30 - AUD    Reserve Bank of Australia Quarterly Statement on Monetary Policy    
August 10th 18:30 - GBP    Gross Domestic Product (QoQ) (2Q) 0.4%
August 10th 22:30 - CAD    Unemployment Rate (JUL) 5.9%
August 10th 22:30 - USD    Consumer Price Index (YoY) (JUL) 2.9%

Post by TorFX

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