Australian Dollar
A better-than-expected performance by the construction industry in July kept the Australian Dollar largely positive on Friday. The AiG Performance of Construction Index did register a slowdown in growth, but the drop from 53.2 to 51.6 was better than the forecast of 50.6, which would have shown barely any growth in the sector at all. The Australian Dollar was able to remain strong despite a dovish outlook for inflation from the Reserve Bank of Australia (RBA) which saw markets pricing in an additional rate cut in 2017 on top of the further policy loosening already expected before the end of 2016.
The first piece of major news likely to move the Australian Dollar this week is actually Tuesday’s Chinese consumer price index for July. Domestically, the NAB Business Confidence index, released at the same time, could also spark some movement. There are no tier-one releases on the calendar for Australia this week.
Sterling
The Australian Dollar was able to rack up bullish gains against the Pound on Friday as the UK unit failed to erode the three-and-a-half-week high achieved by AUD/GBP after the Bank of England (BoE) stimulus announcement. Further weighing on Sterling were comments from BoE Deputy Governor Ben Broadbent, who admitted that he would be one of the policymakers voting for a further cut if future growth came in below forecast. Also, a key survey of recruitment consultancies lead to the conclusion that the UK labour market was ‘in freefall’, with businesses switching to part time and temporary labour and reducing full time staff in the wake of the UK’s Brexit decision.
The UK domestic calendar holds no high-impact domestic data this week, but Tuesday’s slew of industrial, manufacturing and trade data for June is likely to be highly influential.
Euro
Poor German factory orders figures for June weighed on the Euro on Friday after suggesting weakness in the Eurozone’s powerhouse economy and slowing economic growth for the rest of the year. Factory orders dropped -0.4% on the month, instead of growing by 0.5% as predicted. Year-on-year orders slumped at a rate of -3.1%, more than double the anticipated pace of decline. Previously, orders had declined by -0.2%. The French current account balance also weakened, falling further into deficit from -0.3 billion to -0.6 billion.
Markets will have to wait until Friday for high-impact Eurozone data, when the German consumer price index and German, Italian and Eurozone-wide gross domestic product figures are released.
US Dollar
The US Dollar strengthened on Friday after another stellar performance from the US Non-Farm Payrolls report, which showed 255,000 jobs had been created, 75,000 more than forecast. Markets reacted positively to this as it suggested a strong uptrend in the labour market; the previous month’s 265,000 jobs created merely represented a correctional rebound on prior poor performance. Experts had expected job creation to slow so this result caused rate hike bets to be moved forward dramatically, although this still doesn’t leave markets expecting tighter monetary policy this year.
High-impact US data isn’t set for release until Friday, when July’s advance retail sales figure will be published. The preliminary August iteration of the University of Michigan Confidence survey will be released at midnight on Saturday.
Canadian Dollar
The Canadian Dollar remained bearish on Friday, with some long-awaited data failing to counterpoint the persistent oil market headwinds. Crude itself had strengthened further away from recent lows, but was trimming gains once more. Meanwhile, domestic unemployment data was worse-than-expected. Unemployment grew to 6.9% from 6.8% as expected, but the real disappointment was the Net Change in Employment figure. Instead of growing by the forecast 10,000, the number of people in employment dropped by -31,200.
By recent standards, the coming week is quite busy for Canadian data, with today’s building permits figure for June kicking off several days of medium-impact reports.
New Zealand Dollar
The New Zealand Dollar was mixed on Friday, with a quick look at the currencies being gained against revealing that the ‘Kiwi’ had no real strength of its own. There was no domestic data and the US Dollar was strong, leaving the New Zealand Dollar with little tailwinds. Markets were also starting to look ahead to this week, which contains a domestic policy meeting expected to result in an interest rate cut, keeping appetite for the ‘Kiwi’ low.
The focus of the coming week for New Zealand Dollar investors will be Thursday’s Reserve Bank of New Zealand (RBNZ) monetary policy meeting, which is forecast to yield an interest rate cut from 2.25% to 2.00%.