Australian Dollar
A combination of a strong US Dollar, thanks to improved Fed rate hike bets, and falling consumer confidence pushed the Australian Dollar into a strong decline yesterday. The ANZ Roy Morgan consumer confidence index dropped from 121.8 to 118.4, although this still meant that sentiment was strong compared to historical averages. Building approvals also saw a marked rise in July, accelerating 11.3% on the month and 3.1% on the year after previous readings of -2.9% and -5.9% respectively. The data may have pointed to a strong performance in the third quarter from the construction sector, but ‘Greenback’ strength left investors with little appetite for the high-risk ‘Aussie’.
As well as private sector credit figures for July, investors will be paying attention to a speech by the Reserve Bank of Australia’s (RBA) Guy Debelle.
Sterling
The Australian Dollar slumped against the Pound yesterday, as did a number of other currencies, despite poor consumer credit figures from the UK in July. Claims that the UK consumer has so far been unaffected by the Brexit vote were somewhat undermined by a drop in mortgage approvals from 64k to 61k, while net consumer credit fell to 1.1 billion from 1.8 billion instead of to 1.7 billion as forecast. However, the Bank of England (BoE) received an increasing number of offers for its asset purchasing programme and several institutions released better forecasts for Sterling and the UK than they had previously, keeping sentiment positive.
UK consumer confidence for August figures are out soon. Considering yesterday’s figures showed a worse-than-expected weakening in consumer credit, there is a chance the GfK survey index could weaken from -12 rather than recovering to -8 as expected.
Euro
Falling Eurozone business confidence kept the Euro lacklustre yesterday, helped by the advancing US Dollar. Economic confidence dropped from 104.5 to 103.5, the business climate indicator slumped from 0.38 to 0.02, the industrial confidence index from -2.6 to -4.4 and the services confidence index from 11.2 to 10. In all instances the drops were significantly further-than-forecast, while Eurozone consumer confidence also fell, but only because the previous figure was revised higher from -8.5 to -7.9. Creating even more downside pressure was the latest inflation data from Germany, which showed no monthly price growth in the Eurozone powerhouse and steady year-on-year growth of 0.4% instead of the acceleration to 0.5% expected.
It will likely be a busy day for Euro trading today, with German unemployment figures followed by the latest Eurozone consumer price index data.
US Dollar
The US Dollar was bullish yesterday. Traders had come back after the weekend with a fresh perspective on Federal Reserve Chair Janet Yellen’s speech at the Jackson Hole Symposium on Friday. Yellen may not have been as hawkish as markets wanted, but she was still more optimistic than before, bringing rate hike bets back into 2016, albeit in December rather than September as investors had wanted. The US Dollar strengthened even further after a stronger-than-expected consumer confidence score, which climbed from a downwardly revised 96.7 to 101.1, when a fall from the original reading of 97.3 to 97 had been expected.
With the focus now back on the next US Non-Farm Payrolls report, today’s ADP Employment Change figure, often considered an indicator of the performance of the NFP, will be closely watched.
Canadian Dollar
The Canadian Dollar was mixed yesterday, making gains against its commodity currency peers as they retreated in the face of US Dollar strength, but weakening against other majors. News that the Canadian current account deficit widened to the second-highest level on record weighed on the ‘Loonie’. However, Royal Bank of Canada economists had expected an even worse figure of CA$20.2 billion, rather than the weakening from -CA$16.59 billion to -CA$19.86 billion.
Gross domestic product figures for both June and the second quarter of 2016 are due out today. Considering the annualised Q2 figures are expected to show a contraction of -1.5%, it is likely the Canadian Dollar will be on a bearish decline after the release of the data.
New Zealand Dollar
With demand for high-yield assets low yesterday the New Zealand Dollar was left weak. Comments from a Reserve Bank of New Zealand (RBNZ) official did little to provide support. Assistant Governor and Head of Economics Dr John McDermott claimed in a radio interview that it was unlikely interest rates would fall to zero. This is perhaps because, even with the markets pricing in further easing, New Zealand’s official cash rate is still 2% away from that level.
New Zealand’s data today is low-impact, but the latest Business Confidence index could still generate some movement for the ‘Kiwi’.
Data Released
August 31st 09.05 GBP GfK Consumer Confidence Survey (AUG) -8
August 31st 11.00 NZD NBNZ Business Confidence (AUG)
August 31st 11.00 AUD RBA’s Debelle Gives Speech
August 31st 17.55 EUR German Unemployment Change (AUG) 6.1%
August 31st 19.00 EUR Eurozone Consumer Price Index Estimate (YoY) (AUG) 0.3%
August 31st 22.15 USD ADP Employment Change (AUG)
August 31st 22.30 CAD Quarterly Gross Domestic Product Annualized (2Q) -1.5%