Australian Dollar
Risk appetite began to cool somewhat ahead of the weekend, leaving the ‘Aussie’ with only limited support thanks to a lack of fresh domestic data. As the antipodean currency had made substantial gains throughout the week investors were encouraged to engage in a round of profit taking, driving the Australian Dollar lower against rivals. Given the volatile nature of the domestic labour data investors remain concerned that the Reserve Bank of Australia (RBA) could continue its easing bias.
Later in the week the second quarter report on construction work done could offer the ‘Aussie’ a fresh boost, provided that it indicates at least something of a recovery in the sector.
Sterling
After a bullish run of data, the Pound faltered on Friday in response to the latest Public Sector Net Borrowing figure. While the measure clocked in at a surplus of 1.47 billion Pounds this was weaker than forecast, prompting investors to sell out of Sterling.
The government appears on target to miss its borrowing target for the 2016-2017 fiscal year, undermining confidence in the robustness of the post-Brexit economy.
Although Friday’s second quarter UK GDP report is likely to provoke volatility for the Pound, the ultimate impact of the figure is likely to be limited, as it is expected to show no change from the provisional estimate.
Euro
The German Producer Price Index bettered expectations ahead of the weekend, showing a more limited dip in prices than forecast. This suggested that inflationary pressure within the Eurozone’s economy remains robust in spite of recent market uncertainty. However, the outlook of the currency union is still not the most encouraging, as the Spanish trade deficit was found to have widened further in June.
Demand for the single currency could strengthen more markedly on the back of the latest raft of Eurozone PMIs, with any signs of weakness within the domestic economy expected to trigger further Euro softness.
US Dollar
Following the slump seen in the wake of the Federal Open Market Committee (FOMC) minutes the US Dollar nevertheless managed to regain some of its strength. This was in part due to more hawkish commentary from San Francisco Fed President John Williams, who highlighted the perceived risks of not raising interest rates sooner rather than later.
With investors also reconsidering their earlier heavy selling of the ‘Greenback’ the AUD USD exchange rate was prompted to trend sharply lower.
Fed rate hike speculation looks set to remain the major influence on the US Dollar for the foreseeable future, particularly as Fed Chair Janet Yellen will be speaking at the Jackson Hole Symposium at the end of the week.
Canadian Dollar
There was disappointment all round for the ‘Loonie’, with Canadian Retail Sales and Consumer Price Index data falling short of forecast. Markets were not impressed to see that inflationary pressure had fallen from 1.5% to 1.3% on the year in July, prompting further speculation that the Bank of Canada (BOC) could soon return to an easing bias. Even so, with Brent crude having reached a two-month high the picture was not completely bearish for the Canadian Dollar.
Major Canadian data will be rather lacking this week, although if oil prices can extend their recent rally then the appeal of the ‘Loonie’ is likely to improve.
New Zealand Dollar
Some of the bullishness of the ‘Kiwi’ wore off towards the end of last week, although that didn’t prevent it holding onto its recent gains against the Australian Dollar.
New Zealand credit card spending was found to have strengthened markedly in July, seeming to indicate that consumers had been in a more optimistic mood. As a result investors continued to favour the New Zealand Dollar over its antipodean cousin.
The latest New Zealand trade data is due for release on Wednesday, with forecasts pointing towards a weakening that could see the ‘Kiwi’ falter.
Data Released
August 23rd 17:00 EUR Eurozone Manufacturing PMI (AUG P) 51.7
August 23rd 17:00 EUR Eurozone Services PMI (AUG P) 52.9
August 24th 08:45 NZD Trade Balance (JUL) -30 million
August 24th 11:30 AUD Construction Work Done (2Q) -0.5%
August 26th 18:30 GBP Gross Domestic Product (YoY) (2Q P) 2.2%
August 26th 22:30 USD Gross Domestic Product (2Q S) 2.2%