Pound Pushes Higher After Solid UK Growth Data

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  • Rising Chinese Inflation Fails to Benefit Australian Dollar – Weakening business confidence to put further pressure on AUD
  • Solid UK Growth Data Shores up Pound – Brexit optimism surges on latest Barnier comments
  • New Zealand Dollar Under Pressure Ahead of Inflation Reading – Disappointing ANZ truckometer could provoke further NZD losses
  • Oil Prices Support Canadian Dollar – Housing data to offer further boost to CAD exchange rates

Risk Aversion Keeps Australian Dollar on Back Foot

An uptick in the Chinese consumer price index failed to offer particular support to the Australian Dollar yesterday, with investors remaining in a generally risk averse mood. As the US and China look set to impose fresh trade tariffs on one another the appeal of the commodity-correlated AUD naturally diminished. Comments from Reserve Bank of Australia (RBA) Assistant Governor Michele Bullock did little to improve the mood of Australian Dollar exchange rates on Monday.

As the NAB business confidence index is expected to show a decline on the month the Australian Dollar may continue to struggle this morning.

Pound Strengthens as UK Growth Accelerates

A solid acceleration in UK gross domestic product in the three months to July gave the Pound a boost at the start of the week. With growth picking up to 0.6%, driven largely by the summer heatwave and sports, investors saw greater cause for confidence in the domestic outlook. Chief EU negotiator Michel Barnier helped to drive GBP exchange rates higher overnight, as he noted that a Brexit deal could realistically be agreed in the next six-eight weeks.

If UK average weekly earnings pick up as forecast today Sterling could extend its gains across the board.

Swedish Election Results Offer Support to Euro

Although the Eurozone Sentix investor confidence index softened from 14.7 to 12.0 the Euro was able to hold onto a largely positive footing on Monday. As the far right made fewer gains in the Swedish election than initially feared the Euro was buoyed by a sense of political relief, even though neither major party achieved a majority in the vote. Hopes that Italy will not clash with EU budget restrictions also helped to shore up the single currency.

With a modest improvement forecast for the German ZEW economic sentiment survey EUR exchange rates may come under renewed pressure in the near term.

US Dollar Momentum Stalls After Bullish Run

After its strong run last week the US Dollar struggled to find additional upside momentum, particularly in the absence of major domestic data. Even so, USD exchange rates remain supported by the threat of an escalation in the US-China trade dispute. Unless the Trump administration shows signs of easing its protectionist policies the US Dollar is unlikely to face any sustained selling pressure thanks to persistent safe-haven demand.

An uptick in the NFIB small business optimism index for August may give USD exchange rates a fresh boost tonight.

Oil Price Recovery Supports CAD Exchange Rates

The lack of resolution to NAFTA talks was not enough to keep the Canadian Dollar on a weaker footing at the start of the week, even as the Trump administration continues to push for concessions. With oil prices pushing higher once again the appeal of the risk-sensitive CAD improved, as an easing in US drilling pointed towards a decline in global supply. This encouraged demand for the Canadian Dollar, even though the oil market remains in a volatile state.

As forecasts point towards an increase in August’s housing starts figure CAD exchange rates could gain further ground.

More Modest Manufacturing Sales Data Limits New Zealand Dollar Demand

After a smaller-than-expected increase in second quarter New Zealand manufacturing sales NZD exchange rates saw mixed trading. Although sales saw a solid improvement on the year investors were disappointed by the weaker showing, leaving the New Zealand Dollar on a softer footing. As confidence in the outlook of the New Zealand economy remains limited this disappointment weighed heavily on the ‘Kiwi’.

If the ANZ truckometer fails to point towards an uptick in inflationary pressure the mood towards the New Zealand Dollar is likely to sour further.

Data Released

September 11th 08:00 NZD ANZ Truckometer (MoM) (AUG) 
September 11th 11:30 AUD NAB Business Confidence (AUG) 5
September 11th 18:30 GBP Average Weekly Earnings (3M/YoY) (JUL) 2.5%
September 11th 19:00 EUR German ZEW Economic Sentiment Survey (SEP) -13.5
September 11th 20:00 USD NFIB Small Business Optimism (AUG) 108.1
September 11th 22:15 CAD Housing Starts (AUG) 218,000

Post by TorFX

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