Trade Concerns Continue to Limit Australian Dollar

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  • Australian Dollar Weakens as Threat of Further US Tariffs Grows – Softer construction PMI failed to offer support
  • Surprise Contraction in German Exports Dents Euro – Outlook of Eurozone’s powerhouse economy weakens further
  • Latest Barnier Comments Prompt Pound Sterling Jump – Markets encouraged as Barnier pushes for deal
  • Sharp Rise in Canadian Unemployment Weighs on CAD Exchange Rates – Odds of Bank of Canada tightening diminish

Trade War Worries Limit Australian Dollar Demand

The threat of a new trade spat breaking out between the US and Japan put the Australian Dollar on the back foot once again as market sentiment soured. With the Trump administration looking on course to launch fresh automobile tariffs against Japan investors were inclined to sell out of risk-sensitive assets. A slight dip in August’s construction PMI added to the negative mood of AUD exchange rates on Friday, even though home loans saw a surprise rebound in July.

Without an improvement in market risk appetite the Australian Dollar looks set to remain on a weaker footing today.

Pound Benefits From Hopes of Brexit Progress

As the latest consumer inflation expectations survey bettered expectations this encouraged Sterling to push higher ahead of the weekend. GBP exchange rates also received a strong boost as chief EU negotiator Michel Barnier made fresh comments on Brexit. As Barnier stated that ‘the no-deal scenario is not our scenario’ this fuelled hopes that the two sides are making progress towards an agreement. While the issue of the Irish border remains unresolved this was not enough to prevent the Pound leaping higher against its rivals.

With forecasts pointing towards an acceleration in the monthly UK gross domestic product further gains could be in store for GBP exchange rates.

German Export Contraction Drives Euro Losses

Germany’s trade surplus narrowed from 21.8 billion to 16.5 billion in July, falling short of forecast to highlight the issues facing the Eurozone’s powerhouse economy. Particularly discouraging was the surprise -0.9% contraction in exports on the month. With global trade tensions showing no signs of easing in the near future pressure on the German economy looks set to continue building. A sharp contraction in monthly industrial production added to the bearish mood of the Euro.

Any signs of weakness in the Eurozone Sentix investor confidence index may push EUR exchange rates lower.

USD Exchange Rates See Limited Gains on Mixed Jobs Figures

Friday’s US jobs data proved somewhat mixed in nature, limiting the positive impact on USD exchange rates. While the headline change in non-farm payrolls figure bettered forecast to show a solid improvement on the month this was weighed against an unexpectedly steady unemployment rate. This suggests that the US labour market is struggling to tighten further, preventing a stronger US Dollar rally. Even though average hourly earnings showed a surprise improvement this failed to give USD exchange rates much of a boost.

If July’s US consumer credit figure shows an increase, however, the US Dollar could find fresh bullishness.

Canadian Dollar Falters on Disappointing Labour Market Data

Canadian jobs data for August proved distinctly disappointing as net change in employment clocked in at -51,600, almost entirely reversing the previous month’s gain. This pushed up the unemployment rate from 5.8% to 6.0%, significantly undermining confidence in the outlook of the domestic economy. The accompanying decline in wage growth could give the Bank of Canada (BOC) a greater incentive to leave interest rates on hold, leaving the Canadian Dollar lacking in support on Friday.

A recovery in oil prices may help to bolster demand for the Canadian Dollar in the near term.

Threat of US Tariffs Weighs on NZD Rates

The prospect of a further escalation in global trade tensions kept the New Zealand Dollar under pressure ahead of the weekend. With the threat of additional US trade tariffs growing on the horizon NZD exchange rates continued to trend lower in the absence of any supportive domestic data or developments.

However, if the second quarter New Zealand manufacturing sales show a solid improvement on the year the mood towards the ‘Kiwi’ could pick up this morning.

Data Released

September 10th 08:45 NZD Manufacturing Sales (YoY) (Q2) 4.5%
September 10th 18:30 GBP NIESR Monthly Gross Domestic Product Tracker (AUG) 0.7%
September 10th 18:30 EUR Eurozone Sentix Investor Confidence (SEP) 
September 11th 05:00 USD Consumer Credit (JUL) 12.5 billion

Post by TorFX

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