Australian Dollar
News that the Australian government is planning deeper austerity cuts weakened the Australian Dollar yesterday. Malcolm Turnbull appealed to parliament to back the latest measures in order to help repair the budget and avoid passing debt on to future generations. Investors are concerned that his plans may struggle to get approved given the narrowness of the coalition’s majority. Also weighing on sentiment was a slight deceleration in private sector credit growth, which slowed more-than-forecast from 6.2% to 6%.
The AiG Performance of Manufacturing Index for August is due for release today.
Sterling
The Australian Dollar slumped against Pound Sterling yesterday due to strong consumer confidence figures. The latest GfK survey suggested that consumers in the UK were quickly recovering from the initial shock of the Brexit referendum outcome, with the index climbing from -12 to -7. A smaller recovery to -8 had been predicted. Also keeping appetite for the Pound strong were house price figures, which unexpectedly grew both on the year and on the month; a slowdown and a fall into contraction had been forecast respectively.
Markets will be eager to see if the UK’s Markit manufacturing PMI will recover as expected from 48.2 to 49, or if the sector will have weakened further.
Euro
Bets of further European Central Bank (ECB) monetary stimulus were weighing on the Euro yesterday after poor inflation data from the currency bloc. The core consumer price index weakened to 0.8% against forecasts of a hold at 0.9%, while the non-core index held at 0.2% instead of accelerating to 0.3% on the year. Eurozone unemployment also held steady at 10.1%, instead to edging down to 10% as expected. German unemployment bettered expectations thanks to a larger-than-expected fall in the number of people out of work, helping to shore up the Euro.
Finalised Eurozone manufacturing PMIs are expected to show no change on their previous estimates.
US Dollar
The latest US data was strong, helping push bets of Federal Reserve monetary tightening even higher. Mortgage applications grew by 2.8% after a previous -2.1% decline, while the ADP employment change figure saw a slightly higher-than-expected rate of job creation than forecast; 177k instead of 175k after last month’s 194k. Although historically there is only a weak correlation between the two, traders often use the ADP figure as an indication of the later US Non-Farm Payroll report’s performance. As this is the next data likely to have a strong influence on the Fed, a positive result from the ADP report improved market confidence.
Initial and continuing jobless claims figures will be released today and are expected to show a mild uptick in the number of people collecting out of work benefits.
Canadian Dollar
Mixed GDP figures have overall been skewed to the downside yesterday, weakening the Canadian Dollar. After a -0.6% contraction in the previous month, June’s growth figure clocked in at an above-forecast 0.6%, beating predictions by twenty basis points. Year-on-year GDP printed ten basis points higher-than-expected, clocking in at 1.1%. However, trader focus was on the second quarter annualised GDP figure, which showed a worse-than-expected drop in output of -1.6% after the first quarter’s growth, which was revised higher to 2.5%.
The RBC Canadian manufacturing PMI for August is due for release today.
New Zealand Dollar
According to the New Zealand Institute for Economic Research (NZIER), the New Zealand economy has enough momentum to ride out the risks to stability from global uncertainty such as the Brexit, the US elections and the slowing Chinese economy. However, NZIER also predicts that inflation will remain below the bottom end of the Reserve Bank of New Zealand’s (RBNZ) target range until 2017 and forecasts that more interest rate cuts will be needed to boost price growth. Overall the New Zealand Dollar was advancing, although gains were fairly limited and the ‘Kiwi’ struggled around opening levels against Pound Sterling and the US Dollar.
The New Zealand terms of trade index for the second quarter will be published soon and is expected to show a decline of -1.5% after the first quarter’s 4.4% growth.
Data Released
September 1st 08.45 NZD Terms of Trade Index (QoQ) (2Q) -1.5%
September 1st 09.30 AUD AiG Performance of Manufacturing Index (AUG)
September 1st 18.00 EUR Markit Eurozone Manufacturing PMI (AUG F) 51.8
September 1st 18.30 GBP Markit UK PMI Manufacturing s.a. (AUG) 49
September 1st 22.30 USD Initial Jobless Claims (AUG 27) 265k
September 1st 22.30 USD Continuing Claims (AUG 20) 2149k
September 1st 23.30 CAD Canadian Manufacturing PMI (AUG)