Australian Dollar
Markets reacted positively to the news that the Australian Unemployment Rate had unexpectedly dipped from 5.8% to 5.7% in July. This was seen to reduce the pressure on the Reserve Bank of Australia (RBA), given the recent emphasis placed on labour market data in the central bank’s meeting minutes. While the measure is notoriously volatile the suggestion of a tightening jobs market inspired the ‘Aussie’ to rally strongly against rivals, particularly as general risk appetite also picked up on Thursday.
Ahead of the weekend there isn’t any further domestic data to trigger movement for the antipodean currency, with wider investor sentiment likely to dictate the outlook instead.
Sterling
The trend of positive post-referendum data continued with the July Retail Sales report pointing towards a strong increase in consumer spending. Sales grew by an impressive 5.4% on the year, although there is speculation that some of this growth was due to tourists cashing in on the soft Pound. Either way, Sterling was prompted to trend higher across the board in response to the figures, with worries over the outlook of the UK economy easing – at least temporarily.
Later today the Pound is likely to see renewed volatility in response to the latest Public Sector Net Borrowing report, which could show that government debt rose significantly in the wake of the Brexit vote.
Euro
Although the single currency was shored up by a strong recovery in Eurozone Construction Output this failed to keep it on an uptrend for long.
Investors were not overly impressed by the contents of the account of the European Central Bank’s (ECB) July monetary policy meeting, wherein policymakers agreed to convey a ‘cautiously optimistic’ outlook. While this seemed to suggest that the ECB remains in no hurry to ease policy again in the near future the Euro nevertheless trended lower in response.
German Producer Prices could offer the Euro a fresh rallying point today, although any signs of weaker inflationary pressure are likely to encourage a bearish attitude.
US Dollar
Following the more dovish than expected Federal Open Market Committee (FOMC) meeting minutes the ‘Greenback’ slumped sharply against the majors. St Louis Fed President William Dudley added to the downside pressure on the US Dollar by suggesting that interest rates may only need to be raised once over the next two years, a prospect which markets did not appreciate.
Even though the Philadelphia Fed Index for August showed a moderate recovery in manufacturing sector activity, this was not enough to restore the lost strength of the US Dollar.
With no other US data set for release this week the ‘Greenback’ is expected to remain biased to the downside.
Canadian Dollar
Even though clear doubts remain over the likelihood of OPEC members agreeing to curb production in the near future, oil extended its rally throughout Thursday. A drop in US crude inventories encouraged Brent crude higher, with the commodity breaking through the critical US$50 per barrel mark and holding. This bolstered the appeal of the Canadian Dollar further, particularly as markets were in a bullish mood following the dovish Fed minutes.
The ‘Loonie’ is expected to return to a downtrend, however, if this evening’s Canadian Consumer Price Index indicates that inflationary pressure within the economy has weakened as forecast.
New Zealand Dollar
A dip in the ANZ Consumer Confidence Index for August reduced demand for the ‘Kiwi’, with sentiment within the New Zealand economy falling further in the last month. Despite the generally optimistic attitude surrounding the high-yielding New Zealand Dollar this poor showing saw any support from the day’s improved market confidence muted.
If July’s credit card spending figures prove stronger the ‘Kiwi’ is likely to return to a bullish trend, with investors still dismissive of the likelihood of the Reserve Bank of New Zealand (RBNZ) taking further action.
Data Released
August 19th 13:00 NZD Credit Card Spending (YoY) (JUL)
August 19th 18:30 GBP Public Sector Net Borrowing (JUL)
August 19th 22:30 CAD Retail Sales (MoM) (JUN) 0.5%
August 19th 22:30 CAD Consumer Price Index (YoY) (JUL) 1.3%