Australian Dollar
Strong global risk appetite boosted the Australian Dollar yesterday, with markets on the hunt for yield after the latest New Zealand news. As a result, the Australian Dollar hit a two-and-three-quarter-year high against the Pound and was trending around its second-highest level against the US Dollar since the middle of May. Consumer expectations for inflation fell, however, edging lower to 3.5% from 3.7%.
Only low impact credit card spending figures are due from Australia today, but with Chinese data and high-impact US releases on the calendar, there will still be plenty of opportunities for volatile ‘Aussie’ movement.
Sterling
Multiple sources of concern over the UK economy provided tailwinds that allowed the Australian Dollar to Pound Sterling exchange rate to hit its 36-month high yesterday. House pricing data showed a weaker state of price growth than had been expected in July, while consumer confidence hit a two year low according to the latest Thompson Reuters/Ipsos data. Moody’s also warned of downside risks to the mortgage market, while a Bloomberg poll of almost 60 economists revealed the majority outlook for the UK economy is for a -0.1% contraction in Q3 and Q4 of this year.
Today’s UK construction output figures for June are likely to add to the general gloominess hanging over the UK economy. The decline in production is forecast to slow from -2.1% to -1%, but annual production is expected to weaken from -1.9% to -2.1%.
Euro
The Euro was weak yesterday, largely thanks to data showing the inflation was on the decline in several large Eurozone member states. French inflation declined on the month and remained sluggish on the year, harmonised Italian inflation fell to -1.9% on the month after previous 0.2% growth and Irish consumer price growth declined -0.3%. Together these figures pointed to a languorous response amongst some member state economies to the European Central Bank’s (ECB) attempts to stimulate price growth.
There is plenty of Eurozone economic data on the calendar today to generate Euro movement, starting with the finalised German consumer price index for July. Following on from that will be the German, Italian and Eurozone GDP figures for the second quarter. These preliminary figures are largely predicted to weaken, with the only exception being a leap from 1.3% to 2.8% for non-seasonally adjusted year-on-year GDP in Germany.
US Dollar
The US Dollar spent most of the day enjoying a bullish rebound from the previous night’s weakness. A surging New Zealand Dollar had initially depressed the US Dollar as investors turned away from the latter safe-haven currency towards higher yields. As traders took profit on the ‘Kiwi’, the US Dollar strengthened, but disappointing data from the labour markets somewhat undermined the recovery. Initial jobless claims fell by less than expected, while continuing claims grew on the month, even though the previous month’s figure was revised higher as well.
US advance retail sales figures today are expected to show a weakening in July, with growth slowing from 0.6% to 0.4%. An on-forecast performance would add to worries over the US economy, but key US data has underperformed on several recent occasions, creating even more downside risks for the US Dollar.
Canadian Dollar
News that the Canadian government was stepping up its monetary stimulus measures helped the Canadian Dollar to advance, even if seesawing in the oil markets somewhat hampered the ‘Loonie’s advance. The government decided to make the most of record low borrowing costs by issuing a seven-year monthly high amount of bonds in August. While oil initially weakened on strong US stockpiles figures, crude was later able to recover bullishly after the International Energy Agency (IEA) claimed there was virtually no market oversupply in the second quarter of 2016.
There is nothing on the economic calendar today that is likely to generate particularly strong head or tailwinds for the Canadian Dollar.
New Zealand Dollar
The New Zealand Dollar was weakening yesterday, although not because of the depreciating effect of the Reserve Bank of New Zealand (RBNZ) interest rate cut. That decision actually sent the ‘Kiwi’ charging higher due to market expectations of more severe policy easing. Traders later took profit on the New Zealand Dollar, weakening the ‘Kiwi’ against the majors.
The Business NZ Performance of Manufacturing Index for July and retail sales excluding inflation figures for the second quarter are set for release today. No forecast has been made for the manufacturing index, but sales growth is expected to have ticked higher from 0.8% to 1.0%.
Data Released
August 11th 08.30 NZD Business NZ Performance of Manufacturing Index (JUL)
August 11th 16.00 EUR German Consumer Price Index (YoY) (JUL F) 0.4%
August 11th 18.30 GBP Construction Output s.a. (YoY) (JUN) -2.1%
August 11th 19.00 EUR Eurozone Gross Domestic Product s.a. (YoY) (2Q P) 1.6%
August 11th 22.30 USD Advance Retail Sales (JUL) 0.4%