Rising Retail Sales Bolster Australian Dollar

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Headlines

  • Australian Dollar Strengthened on Sharp Increase in Australian Retail Sales – Signs of rising inflation may drive further AUD gains
  • Sterling Extended Losses as UK Service Sector Disappointed – Slowing growth exacerbated concerns over Brexit uncertainty
  • USD Exchange Rates Weakened in Spite of Falling Unemployment – Fears mount over escalating US-China trade dispute
  • Narrowed Trade Deficit Shored up Canadian Dollar – Rise in exports encourages investor confidence


Australian Dollar

An unexpectedly sharp uptick in second quarter Australian retail sales excluding inflation encouraged the Australian Dollar to push higher ahead of the weekend. As sales rose 1.2% on the quarter this suggests that consumer sentiment is improving, in spite of rising global trade tensions. Even though China announced its intention to place retaliatory tariffs on US$60 billion worth of US imports this was not enough to knock AUD exchange rates off an uptrend on Friday.

Even so, if the latest TD Securities inflation measure suggests that domestic price pressures are easing this could dent the appeal of the Australian Dollar.

Sterling

Confidence in the Pound deteriorated further as July’s UK services PMI fell short of forecast, slipping from 55.1 to 53.5. While the index remained firmly within expansion territory this softer showing still represents a slowdown in sector growth. With the UK economy appearing to have started the third quarter on a weaker footing demand for Sterling continued to diminish. Comments from Bank of England (BoE) Governor Mark Carney failed to offer support to GBP exchange rates, meanwhile.

As Brexit-based uncertainty continues to cast a shadow over the domestic outlook the Pound may struggle to regain its lost ground.

Euro

Eurozone data failed to impress on Friday, with retail sales proving weaker than expected and July’s finalised services PMIs seeing a downward revision. This left the Euro under pressure as confidence in the underlying economic health of the currency union weakened further. As the Eurozone shows no real signs of regaining the economic momentum lost at the start of the year investors have seen little reason to favour the single currency.

As forecasts point towards a contraction in German factory orders EUR exchange rates could extend their downtrend further this afternoon.

US Dollar

While the US unemployment rate fell from 4.0% to 3.9% in line with expectations this was not enough to boost USD exchange rates. Even though the US labour market continues to use up its slack the upside potential of the US Dollar was still limited. As wage growth remains lacklustre investors still see cause for caution, in spite of the Federal Reserve’s intention to raise interest rates in September. The threat of Chinese counter-tariffs on US imports also dented the appeal of the US Dollar.

After its recent bullish run the US Dollar may come under further pressure today, especially if market risk appetite picks up.

Canadian Dollar

As the Canadian trade deficit narrowed further than forecast in June this offered a boost to the Canadian Dollar. With a sharp increase in export volumes helping to drive the improvement in trade conditions this encouraged greater optimism in the outlook of the Canadian economy. Although oil prices remained under pressure this failed to keep CAD exchange rates under pressure heading into the weekend.

However, in the absence of fresh domestic data the Canadian Dollar could easily reverse its uptrend today.

New Zealand Dollar

The latest escalation in trade tensions between the US and China limited the appeal of the New Zealand Dollar on Friday. With markets bracing for the trade dispute to intensify further over the coming days the risk-sensitive NZD generally weakened. However, as the US Dollar also saw losses this helped to prevent a greater downtrend in NZD exchange rates.

An uptick in the ANZ commodity price index may offer the New Zealand Dollar a boost this morning.


Data Released

August 6th 11:00 AUD TD Securities Inflation (YoY) (JUL) 
August 6th 11:00 NZD ANZ Commodity Price (JUL) 
August 6th 16:00 EUR German Factory Orders (MoM) (JUN) -0.2%

Post by TorFX

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