Weakening Chinese Growth Failed to Drag Australian Dollar Lower

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Headlines

  • Australian Dollar Strengthened as Building Approvals Avoided Contraction – ‘Aussie’ shrugs off signs of weakening Chinese growth
  • EUR Exchange Rates Hampered by Surprise Eurozone Growth Slowdown – Rising inflation unable to boost Euro
  • Strong GDP Failed to Boost Canadian Dollar – Oil market worries continue to limit CAD demand
  • Underwhelming Sentiment Indicators Weighed on New Zealand Dollar – Forecasts suggest steady second quarter unemployment rate



Australian Dollar

While the latest Chinese manufacturing PMI disappointed forecasts this failed to prevent Australian Dollar exchange rates returning to an uptrend on Tuesday. While market risk appetite faltered the appeal of the ‘Aussie’ improved on the back of June’s Australian building approvals figures. Rather than showing a sharp decline as predicted approvals instead strengthened 1.6% on the year, encouraging greater hope in the domestic outlook.

A similarly positive showing from this morning’s manufacturing PMI could offer AUD exchange rates an additional boost.

Sterling

The UK GfK consumer confidence index unexpectedly weakened on the month in July, falling from -9 to -10. This indicates that domestic sentiment has continued to deteriorate in spite of the recent weather, boding ill for the outlook as Brexit-based jitters look set to pick up. Sterling softened in response to the disappointing data, even though the decline did not diminish the odds of the Bank of England (BoE) raising interest rates this week.

If July’s UK manufacturing PMI also falls short of expectations this may encourage further selling of the Pound.

Euro

Although the headline Eurozone consumer price index bettered forecast to strengthen to 2.1% this was not enough to shore up EUR exchange rates yesterday. Even as inflationary pressure within the currency union continued to build the mood towards the single currency remained generally muted. This was thanks to the less encouraging nature of the second quarter Eurozone gross domestic product, which saw a greater loss of momentum than anticipated.

With no change forecast for the finalised Eurozone manufacturing PMI the Euro is unlikely to find any particular support in the near term.

US Dollar

An uptick in the latest US consumer confidence index helped to shore up the US Dollar overnight. The modest improvement in domestic sentiment limited the negative impact of a weaker-than-expected personal consumption expenditure core reading. While inflation was revised lower investors continue to see the Federal Reserve pursuing monetary tightening over the coming months. This kept USD exchange rates on a positive footing, especially as market risk appetite diminished.

With forecasts pointing towards a decline in the ISM manufacturing index, however, the US Dollar may come under renewed pressure.

Canadian Dollar

May’s Canadian gross domestic product data surpassed expectations, with growth accelerating 2.6% on the year. However, this bullish data was not enough to prevent the Canadian Dollar trending lower during Tuesday’s European session. CAD exchange rates instead came under pressure thanks to a slump in oil prices, driven by the latest worries over global oversupply. With markets in a less risk-positive mood the Canadian Dollar quickly fell out of favour.

Even so, if the Canadian manufacturing PMI also surprises to the upside this could boost CAD exchange rates.

New Zealand Dollar

NZD exchange rates softened in response to July’s ANZ activity outlook as the index dropped from 9.4 to 3.8. This weaker showing underlines the relatively muted outlook of the New Zealand economy, giving investors little incentive to buy into the New Zealand Dollar. Business confidence also continued to decline on the month, putting further pressure on the ‘Kiwi’.

Although no change is forecast for the headline second quarter unemployment report the details of the latest New Zealand labour market data could provoke fresh volatility for NZD exchange rates.


Data Released

August 1st 08:30 AUD Manufacturing PMI (JUL) 
August 1st 08:45 NZD Unemployment Rate (2Q) 4.4%
August 1st 18:00 EUR Eurozone Manufacturing PMI (JUL F) 55.1
August 1st 18:30 GBP Manufacturing PMI (JUL) 54.2
August 1st 23:30 CAD Manufacturing PMI (JUL) 
August 2nd 00:00 USD ISM Manufacturing Index (JUL) 59.3

Post by TorFX

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