Australian Dollar
The Australian Dollar trended bullishly on Friday after poor US data weakened the US Dollar. There was no domestic data to provide additional support or resistance, although ANZ analysts had warned that a significant decline in GDP growth would be seen in data for the second quarter. Economic expansion is expected to have slowed from 1.1% to just 0.3%, although ANZ was quick to point that even if the data corroborates the predictions, GDP growth for the whole year would remain above trend.
Tuesday will see the next Reserve Bank of Australia (RBA) interest rate decision; one of many such meetings from various central banks over the coming days. A freeze is currently forecast, meaning rates look set to remain at 1.5%.
Sterling
Strength in both the Australian Dollar and Pound Sterling saw the AUD/GBP exchange rate locked around opening levels on Friday. With the day’s US data out, traders were ready to adjust their positions and buy into Sterling, enticed by another bullish PMI performance. While the construction index didn’t quite manage to climb into growth territory, the score of 49.2 was significantly better than the forecast 0.6 point increase to 46.5. When Thursday’s manufacturing PMI result is also taken into account, the construction index bodes well for today’s services PMI.
The UK services PMI is due for release later today and will be the best measure of the UK’s economic health post-Brexit considering the services sector accounts for around four-fifths of the country’s output. A weaker-than-expected result here will likely see the Pound resume its recent downtrend.
Euro
Little data was available for the Eurozone on Friday, although what releases there were largely disappointed. Spanish unemployment unexpectedly increased, climbing by 14.4k instead of dropping -49.7k as forecast. Italy’s GDP showed, as forecast, no growth on the quarter in the second quarter of the year, furthering concerns about the health of the Eurozone’s third largest economy. Adding to fears over sluggish inflation was a continued drop in the producer price indices for July, although the decline did slow marginally from -3.1% to -2.8%.
The European Central Bank (ECB) will decide upon monetary policy on Thursday. No changes are expected to interest rates, but there are some who believe the Governing Council will alter the asset purchasing programme because the supply of eligible bonds continues to shrink, causing problems.
US Dollar
Highly-anticipated ecostats from the US disappointed on Friday, cooling bets of an interest rate hike from the Federal Reserve before the end of the year. The headline non-farm payrolls figure markedly undershot forecasts, clocking in at 151k instead of slowing from a seasonally-distorted 275k to 180k. The unemployment rate remained at 4.9% instead of edging down to 4.8%, while average hourly earnings grew just 0.1% on the month and slowed from 2.7% to 2.4% on the year.
Wednesday’s ISM non-manufacturing composite will be closely watched as the next headline data that could alter the Fed’s odds of altering monetary policy.
Canadian Dollar
The falling US Dollar sparked a bullish recovery for crude oil, with both WTI and Brent rocketing up around 3% after the biggest weekly loss in two months. Further boosting oil market sentiment were comments from the Saudi Arabian Foreign Minister that the Organisation for the Petroleum Exporting Countries (OPEC) could reach some kind of agreement to boost oil prices.
The Bank of Canada (BOC) makes its next interest rate decision on Thursday, although forecasts are for rates to be held at 0.50%. In fact, according to the latest Reuters survey, economists don’t expect tighter monetary policy until the first quarter of 2018, back from earlier predictions of a hike in mid-2017.
New Zealand Dollar
The New Zealand Dollar was mixed on Friday, despite the strong tailwinds created by US Dollar weakness. Risk-demand worked more in favour of the ‘Aussie’, keeping NZD/AUD negative, while the ‘Loonie’ caused a ‘Kiwi’ slump thanks to the additional boost from the crude oil markets. The New Zealand Dollar was still able to advance against other peers, but gains were limited.
On Tuesday the latest GlobalDairyTrade auction could generate considerable movement for the New Zealand Dollar.
Data Released
September 5th 18.30 GBP Markit/CIPS UK Services PMI (AUG) 50.0
September 6th NZD Dairy Auction Avg. Winning Price MT (SEP 6)
September 6th 14.30 AUD Reserve Bank of Australia Rate Decision (SEP 6) 1.5%
September 7th 00.00 USD ISM Non-Manufacturing Composite (AUG) 55.5
September 8th 00.00 CAD Bank of Canada Rate Decision (SEP 7) 0.50%
September 8th 21.45 EUR European Central Bank Rate Decision (SEP 8) 0.00%