Australian Dollar
It was a relatively strong start to the week for the ‘Aussie’ with markets still in a bullish mood following last week’s disappointing US data. Iron ore prices rallied strongly in spite of signs that Chinese demand for the metal was diminishing, offering further support to the commodity-correlated Australian Dollar. Thus, in spite of an absence of domestic data on Monday, the ‘Aussie’ made gains across the board.
Later this morning the August meeting minutes of the Reserve Bank of Australia (RBA) could weaken the antipodean currency if policymakers are shown to have taken a more dovish stance on monetary policy.
Sterling
Confidence in the Pound remained muted on Monday as the Rightmove House Price Index proved discouraging. In August prices contracted -1.2% on the month, suggesting that the domestic housing market is finding it hard to shake off the detrimental impact of the shock Brexit vote.
With Bank of England (BoE) policymaker Andy Haldane having expressed concerns over the effectiveness of looser monetary policy at this juncture there was little reason for investors to buy into Sterling. Consequently the Australian Dollar to Pound Sterling exchange rate climbed to a fresh two-year best of 0.5955.
Further losses could be in store for the Pound on the back of July’s UK Consumer Price Index report, the first gauge of post-Brexit inflationary pressure.
Euro
There wasn’t much in the way of motivation for the single currency at the start of the week thanks to the fact that many of the Eurozone countries were busy honouring the Assumption of Mary. With no fresh domestic data to prompt volatility the Euro was primarily driven by the movement of the US Dollar, thanks to the negative correlation of the Euro to US Dollar exchange rate. As the latest Bundesbank monthly report expressed confidence in the outlook of the German economy the single currency was encouraged higher against many of its rivals.
If today’s ZEW Economic Sentiment Surveys point towards a similar improvement in confidence then the Euro could experience a stronger rally.
US Dollar
Downside pressure continued to weigh on the US Dollar, with the latest domestic data failing to distract from the weakness of Friday’s poor retail sales and consumer confidence results. The Empire Manufacturing Index was found to have fallen substantially short of forecasts in August, dipping from 0.55 to -4.21. As investors had anticipated a strengthening of the manufacturing measure this prompted the ‘Greenback’ to extend its slump. With the likelihood of the Federal Reserve returning to its monetary tightening cycle in the near future seeming weaker, the US Dollar is expected to remain on a softer footing in the coming days.
If July’s US inflation data is found to have also weakened then the appeal of the ‘Greenback’ can be expected to fall further, to the benefit of the ‘Aussie’.
Canadian Dollar
Brent crude smashed back above the US$48 per barrel mark overnight, even though the Baker Hughes US rig count was found to have risen markedly in the last week. With markets speculating that OPEC could be considering a coordinated action to support oil prices and tackle the global oversupply glut the commodity trended bullishly. This helped to eclipse a less encouraging Canadian Existing Home Sales figure, which offered further evidence of weakness within the domestic housing market.
Should oil prices remain on the up then the Canadian Dollar could strengthen further, particularly in the absence of other domestic data.
New Zealand Dollar
In spite of the New Zealand Services PMI for July showing a softening on the month, this failed to dent demand for the ‘Kiwi’. While the PMI dipped from 56.4 to 54.2 this nevertheless indicated a strong level of sector growth, offering encouragement for the health of the economy. With risk appetite heightened due to the relative weakness of the US Dollar the New Zealand Dollar remained on an uptrend.
Today’s GlobalDairyTrade auction results could diminish the appeal of the ‘Kiwi’, unless prices continue to climb.
Data Released
August 16th NZD Dairy Auction Avg. Winning Price MT (AUG 16)
August 16th 11:30 AUD Reserve Bank of Australia August Meeting Minutes
August 16th 18.30 GBP Consumer Price Index (YoY) (JUL) 0.5%
August 16th 19.00 EUR Eurozone ZEW Survey (Economic Sentiment) (AUG) -9.4
August 16th 22.30 USD Consumer Price Index (YoY) (JUL) 0.9%