Rising Eurozone Construction Output Failed to Boost Euro

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Headlines

  • Anticipation for US-China Trade Talks Weighed on AUD – Markets brace for RBA meeting minutes
  • Weaker UK House Prices Failed to Dent Pound – Further gains possible on solid government borrowing figure
  • Euro Failed to Capitalise on Stronger Eurozone Construction Output – Confidence in inflation outlook diminishes
  • US Dollar Gains Limited Ahead of Fed Minutes – Federal Reserve set to maintain more hawkish policy bias


Australian Dollar

Demand for the Australian Dollar proved limited on Monday, with a lack of domestic data leaving investors with little incentive to buy into the antipodean currency. As anticipation mounted for the latest round of trade talks between the US and China market demand for risk-sensitive assets naturally declined. With investors wary of the prospect of the trade spat escalating further AUD exchange rates struggled to find any traction.

Further weakness could be in store for the Australian Dollar today if the Reserve Bank of Australia’s (RBA) August meeting minutes prove less hawkish in outlook.

Sterling

While the Rightmove house price index failed to paint a particularly encouraging picture of the domestic outlook this failed to weigh down the Pound. As prices slumped -2.3% on the month this suggests that the UK housing market remains in a relatively sluggish state. Even so, GBP exchange rates benefitted from the relative weakness of its rivals and easing worries over the prospect of a no deal Brexit.

As forecasts point towards a dip July’s UK public sector net borrowing data this may offer Sterling some encouragement, with a narrowing of the fiscal deficit likely to boost sentiment.

Euro

Better-than-expected Eurozone construction output data was not enough to bolster the Euro yesterday. The single currency remained under pressure in spite of Greece successfully exiting its bailout programme after eight years, in part thanks to lingering worries over Turkey. July’s German producer price index figures added to the more bearish mood of the single currency, indicating that inflationary pressure within the currency union remains limited.

Any fresh escalation in the Turkish financial crisis could put further weight on the Euro in the near term.

US Dollar

As anticipation builds for the Federal Open Market Committee’s (FOMC) latest meeting minutes the downside potential of the US Dollar has proved limited. However, USD exchange rates struggled to find a fresh leg up overnight in the absence of any US data. Market jitters over Turkey and the start of US-China trade talks also offered a boost to the safe-haven US Dollar at the start of the week, though.

Speculation over the policy outlook of the Federal Reserve is likely to provoke further movement for USD exchange rates today.

Canadian Dollar

Stronger oil prices helped to limit the downside potential of the Canadian Dollar yesterday, even though market risk appetite generally deteriorated at the start of the week. Markets remain jittery over the future of NAFTA, given the persistent protectionism on display from the Trump administration. Even so, with Brent crude still trending above US$72 per barrel CAD exchange rates saw limited losses.

If June’s wholesale trade sales data shows a softening on the month, though, the Canadian Dollar could slide once again.

New Zealand Dollar

The general lack of risk appetite left New Zealand Dollar exchange rates on a soft footing on Monday, even though the New Zealand economy is less exposed to risk from a Chinese slowdown. With investors seeing little incentive to favour the ‘Kiwi’ over its rivals the antipodean currency fell further out of favour.

However, NZD exchange rates could find a rallying point this morning if July’s credit card spending data proves encouraging in nature.


Data Released

August 21st 11:30 AUD Reserve Bank of Australia Meeting Minutes 
August 21st 13:00 NZD Credit Card Spending (YoY) (JUL) 
August 21st 18:30 GBP Public Sector Net Borrowing (JUL) -2.2 billion
August 21st 22:30 CAD Wholesale Trade Sales (MoM) (JUN) 0.9%

Post by TorFX

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