Australian Dollar
There was little to encourage investors to buy the Australian Dollar yesterday, but the ‘Aussie’ still managed to remain in positive territory – and even make some gains – thanks to US Dollar weakness. Adding headwinds to the ‘Aussie’s progress were comments from Treasurer Scott Morrison, who warned that parliament needed to approve his new budgetary savings measures, lest the economy face a debt blowout of AU$1 trillion in the coming decade. Among Morrison’s plans are controversial cuts to corporation tax which will lower it to 25% by 2026.
There is no Australian data on the calendar today, although this is a rather moot point; with market focus on the US, domestic reports would likely have had little impact upon the ‘Aussie’.
Sterling
CBI data earlier in the week may have undermined the AUD/GBP exchange rate, but yesterday’s figures from the Confederation of British Industry (CBI) failed to provoke a repeat performance. Expected to climb from -14 to 0, the CBI Retailing Reported Sales index for August instead recovered to 9, while Total Dist. Reported Sales rebounded from -11 to 17. Comments from the surveys that retailers were expecting conditions to worse marginally going forward, with staff numbers falling among other things, kept markets bearish on the Pound.
While preliminary UK GDP figures for the previous quarter would usually cause significant movement for Pound Sterling, the fact that the latest data refers only to pre-Brexit Britain may mean that markets largely ignore the figures, unless a drastic change occurs.
Euro
The weak US Dollar allowed the Euro to remain strong yesterday due to the inverse correlation between the world’s most-traded currency pair. This was regardless of strong headwinds facing the Euro after the latest German Ifo business surveys showed a surprise fall in confidence. The Business Climate, Current Assessment and Expectations indices for August had all been expected to creep marginally higher on previous levels, yet instead all registered a sizeable drop. Nevertheless, the Euro made reasonable advances against its peers.
German consumer confidence data is due out today and it is likely that markets will be concerned about the GfK survey showing that consumer sentiment mirrored the fall in business outlook revealed by yesterday’s Ifo surveys.
US Dollar
With traders focussed on today’s key speech from Janet Yellen, Chair of the Federal Reserve, not even positive domestic data could boost the US Dollar. The ‘Greenback’ remained soft virtually across the board, even though preliminary goods orders for July registered an even more bullish-than-expected recovery. Orders leapt from -4.2% to 4.4%, instead of the forecast 3.4%. However, the positive implications of the data were slightly lessened due to the fact that this represents a recovery from last month’s unexpected crash into contraction territory, which was itself revised even higher yesterday, up from -4%. Jobless claims were also positive, but again this did not register with traders fixated on the Federal Reserve.
There are plenty of high-impact US developments on the calendar today, including the advance goods trade balance, annualised gross domestic product for the second quarter, and the gross domestic product price index. However, with Janet Yellen’s important speech taking place at midnight, these releases could find themselves largely ignored.
Canadian Dollar
The Canadian Dollar was largely positive yesterday, with some positive domestic developments helping a rise in crude oil to boost the ‘Loonie’. WTI and Brent were both gaining more than 1%, recovering after the shock of larger-than-expected US stockpiles. Meanwhile, the Canadian CFIB Business Barometer for August climbed from 57.6 to 59.8. Also, the Royal Bank of Canada posted sizeable profit growth and investors were happy to see that the bank had set aside less capital to cover the deficit from bad debts. This suggested that the bank was confident that the economy was strong enough to enable its customers to meet their repayments.
There is no Canadian data scheduled for release today. However, the Canadian Dollar will respond to the content of Janet Yellen’s speech; if it strengthens the US Dollar, the ‘Loonie’ will fall due to the fact it will make exporting across the border less lucrative and importing more expensive for Canadian companies.
New Zealand Dollar
Wednesday had seen the New Zealand Dollar surge, so yesterday saw a bout of profit-taking pressuring the ‘Kiwi’ lower again. This was despite positive developments for the New Zealand economy as dairy co-operative raised its price forecasts for milk solids. Over the coming season the world’s largest exporter of dairy now expects prices to be 50 cents higher than initially thought, although it did point to the strength of the New Zealand Dollar as being problematic for the industry.
No New Zealand economic data is scheduled for release today, but like most of the major currencies, the New Zealand Dollar will largely move according to US Dollar fluctuations after Janet Yellen’s Federal Reserve speech anyway, so domestic reports would have been side lined had any been published.
Data Released
August 26th 16.00 EUR German GfK Consumer Confidence Survey (SEP) 10
August 26th 16.45 EUR French Gross Domestic Product (YoY) (2Q P) 1.4%
August 26th 18.30 GBP Gross Domestic Product (YoY) (2Q P) 2.2%
August 26th 22.30 USD Advance Goods Trade Balance (JUL) -$63.0b
August 26th 22.30 USD Gross Domestic Product (Annualized) (2Q S) 1.1%
August 27th 00.00 USD Fed Chair Yellen to Speak at Jackson Hole Policy Symposium