Australian Dollar
Yesterday was a mixed one in terms of Australian news, with the Australian Dollar firm but unable to advance versus stronger currencies like the New Zealand Dollar. In positive news, consumer confidence jumped 3.6% last week to a level not seen since the end of 2013. The indexed climbed from 117.6 to 121.8, significantly above the long term 112.8 average score. Less optimistically, big-four accountancy firm KPMG has predicted that Australia could see a diminishing return from corporation tax as overseas authorities attempt to tax imports. According to KPMG, the loss to Australia’s economy will be ‘easily in the billions’.
Second quarter construction work done figures are expected to show a mild slowdown in the current pace of decline from -2.6% to -2%.
Sterling
The Pound continued to pressure the Australian Dollar lower yesterday, despite the overall firmness of the ‘Aussie’. Data from the Confederation of British Industry (CBI) printed above expectations. While the Trends Total Orders index continued to decline, the drop was much more marginal than had been predicted, weakening from -4 to -5 instead of to -10. The Trends Selling Prices index climbed from 5 to 8. Investors were also cheered by the fact that the Bank of England (BoE) managed to successfully buy the required amount of government bonds to fulfil its quantitative easing plans for the second consecutive week. Doubts had been cast over the asset purchasing plan after the BoE’s first reverse auction fell short by around £50 million worth of bonds.
Today’s BBA loans for house purchase figure is expected to show a weakening in mortgage lending in July, with 38500 loans having been approved compared to June’s 40103.
Euro
Mixed PMIs and falling consumer confidence softened the Euro yesterday. While the French and Eurozone PMIs bettered forecasts, the German indices all weakened further-than-predicted. Overall, however, the data still pointed towards strong growth in the second quarter. The markets remained wary, however, with the Euro finally tipping into a bilateral downtrend after the latest consumer confidence figures unexpectedly weakened. The confidence index fell from -7.9 to -8.5, instead of edging higher to -7.7 as predicted.
Finalised German GDP figures for the second quarter tomorrow are expected to remain unchanged from initial estimates, showing strong 3.1% growth on a non-seasonally adjusted basis.
US Dollar
The approach of Friday’s speech by Federal Reserve Chair Janet Yellen at the Jackson Hole Symposium kept the US Dollar soft yesterday. Strength in the New Zealand Dollar entertained an atmosphere of risk-appetite, lowering demand for the safe-haven ‘Greenback’. Investor sentiment was further soured after the Markit manufacturing PMI showed a worse-than-expected decline in activity. The index dropped from 52.9 to 52.1 instead of 52.6. The Richmond Fed Manufacturing Index also disappointed, crashing from 10 to -11 instead of to 6. Fear that the data could affect the Fed’s outlook on the US economy, thereby lowering their inclination to tighten policy, encourage investors to pull away from the US Dollar.
US mortgage and house price figures are set for release later on today.
Canadian Dollar
The Canadian Dollar was on a mixed footing yesterday, with appetite for the ‘Loonie’ again soured by a continued slide in crude oil. Hopes that the recent rally would be part of a more permanent recovery had quickly started to evaporate as WTI dropped back below US$47 and Brent fell below US$49.
There is no Canadian data set for release today either, so it looks as though the Canadian Dollar will spend another day in the grips of oil market jitters.
New Zealand Dollar
Comments from Reserve Bank of New Zealand (RBNZ) Governor Graeme Wheeler yesterday pushed the New Zealand Dollar into strong advance. While Wheeler did signal that further easing was on its way, appetite for the ‘Kiwi’ was boosted when he claimed that the RBNZ should not be too aggressive with rate cuts. Loosening policy too fast and too quickly could risk boiling the already overheated housing market in New Zealand, leading to a crash.
Trade balance figures for July are due out later today and could create headwinds for the New Zealand Dollar. An uptick in imports and slowdown in export growth is expected to see the trade balance shift from a 127 million surplus to a deficit of -325 million.
Data Released
August 24th 08.45 NZD Trade Balance (New Zealand dollars) (JUL) -325m
August 24th 11.30 AUD Construction Work Done (2Q) -2.0%
August 24th 16.00 EUR German Gross Domestic Product n.s.a. (YoY) (2Q F) 3.1%
August 24th 18.30 GBP BBA Loans for House Purchase (JUL) 38500
August 24th 21.00 USD MBA Mortgage Applications (AUG 19)