Sterling Remains Muted as UK Wage Growth Disappoints

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Headlines

  • Improved Business Confidence Failed to Boost Australian Dollar – Chinese economy shows signs of weakness
  • Sterling Struggled to Capitalise on Surprise UK Unemployment Rate Dip – Average weekly earnings proved less encouraging in nature
  • Euro Remained Out of Favour in Spite of Stronger Eurozone Growth – Scepticism remains over economic outlook
  • Rising Oil Prices Benefitted Canadian Dollar – Falling global supply boosts crude prices


Australian Dollar

July’s NAB business confidence index saw a modest uptick on the month, rising from 6 to 7. This suggests that sentiment within the Australian economy is improving, in spite of persistent international trade tensions. However, this failed to offer any significant boost to the Australian Dollar on Tuesday as the general sense of market risk appetite remained muted. Weaker-than-expected Chinese retail sales and production data put additional pressure on AUD exchange rates.

An improvement in the Westpac consumer confidence index may offer a boost to the Australian Dollar today, however.

Sterling

While July’s UK unemployment rate saw a surprise dip from 4.2% to 4.0% the Pound struggled to particularly capitalise on this positive development. The decline in the unemployment rate was largely driven by a decrease in the number of economically active individuals, limiting the impact of the data. Investors were also discouraged by the disappointing nature of June’s average weekly earnings data, which unexpectedly slowed from 2.5% to 2.4% in the second quarter.

Further volatility is in store for GBP exchange rates this evening with the release of the latest UK consumer price index.

Euro

An upward revision to the second quarter Eurozone gross domestic product data was not enough to shore up the Euro yesterday. Even though the growth rate proved stronger than forecast the currency union is still struggling to recover the economic momentum lost since the start of 2018. Worries over Turkey continued to weigh on the minds of investors, meanwhile, with the threat to the European banking system persisting as the crisis shows no signs of de-escalation.

Unless the Turkish Lira shows a more sustained recovery today the mood towards the Euro is likely to remain rather muted.

US Dollar

The US Dollar lost some of its steam overnight, even as the Turkish financial crisis continued to rumble on. Although the general sense of market risk appetite remained elevated USD exchange rates struggled to extend their gains further. July’s export price index proved disappointing, meanwhile, as the measure showed an unexpected contraction on the month. With the impact of trade tariffs beginning to bite the US Dollar faltered.

As forecasts point towards a dip in advance retail sales this could put further pressure on USD exchange rates overnight.

Canadian Dollar

News that Saudi Arabia has cut its crude production encouraged oil prices to push higher on Tuesday, benefitting the Canadian Dollar. With pressures on global oil supply mounting this helped the price of the commodity to pick up. While trade tensions between the US and Canada remained sour this failed to particularly weigh on CAD exchange rates at this juncture, even though the threat of fresh US tariffs remains.

However, if US oil stockpiles show a build up tonight the Canadian Dollar may return to a downtrend.

New Zealand Dollar

After Monday’s positive New Zealand data NZD exchange rates remained on a bullish run, even as market risk appetite remained limited. The improvement seen in July’s food price index gave investors cause for confidence in the outlook of the domestic economy, keeping the New Zealand Dollar in a buoyant mood. As demand for the US Dollar eased slightly this offered additional support to NZD exchange rates.

The New Zealand Dollar may struggle to hold onto a positive footing in the near term, though, without the support of fresh domestic data.


Data Released

August 15th 10:30 AUD Westpac Consumer Confidence (AUG) 103
August 15th 18:30 GBP Consumer Price Index (YoY) (JUL) 2.5%
August 15th 22:30 USD Advance Retail Sales (MoM) (JUL)  0.1%

Post by TorFX

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