Australian Dollar
The Australian Dollar was bullish yesterday thanks to strong domestic and Chinese data. The Australian trade deficit narrowed significantly more than forecast, shrinking from -3250 million to -2410 million. The performance was even better considering the previous month’s figure was revised higher, with the total drop taking the deficit -300 million below what was expected. Chinese statistics showed an unexpected return to growth for imports, with shipments up 1.5% instead of recovering from -12.5% to -5.7% as predicted.
Today could be a busy day for the Australian Dollar thanks to the release of the Chinese consumer price index, which is forecast to tick marginally lower on the year. Considering Australian home loans are predicted to have declined by -1.5% in July and investment lending and value of loans figures are also due for release, the Australian Dollar could face strong headwinds.
Sterling
The RICS house price balance may have posted a strong recovery, but the Australian Dollar was still able to advance against the Pound thanks to other recent developments. The National Institute for Economic and Social Research (NIESR) released their report during Wednesday’s London session, but the implications were still souring the Pound yesterday. According to the institute, the UK was still heading for a recession, potentially in 2017, sapping some of the positivity generated by the recent run of strong post-Brexit UK data.
July’s trade and construction output data will further chronicle the UK economy’s reaction to the Brexit referendum vote. Considering recent soft manufacturing data soured appetite for the Pound, a further weakening trade balance or construction output would likely give AUD/GBP a strong boost. Forecasts are for trade to have improved and construction to have weakened on the year, which could leave Sterling unsteady.
Euro
The Euro trended bullishly yesterday after the European Central Bank (ECB) left interest rates on hold. Policymakers also made no changes to quantitative easing, with President Mario Draghi stating that an extension to the programme hadn’t been discussed. This boosted market sentiment, as many had expected the Governing Council to tweak the parameters of asset purchasing. While Draghi did claim that interest rates needed to stay low for some time, he was also upbeat on the effectiveness of the ECB’s policy decisions, despite rising criticism that they were having little effect.
German trade data is set for release today. Although German data has developed a habit of disappointing forecasts in recent days, the German trade and current account surpluses are both considerable, so it would take a severe weakening in exports to provoke consternation among investors.
US Dollar
Fed hawks were out in force yesterday, with Jeffery Lacker claiming the case for hiking interest rates this month was strong, while Esther George postulated that the labour market may be at full strength already. Neither of these sentiments managed to give the US Dollar much traction, however, with the ‘Greenback’ a passive player in the day’s exchange rate movement. Jobless claims data was positive, showing a surprise fall in initial jobless claims and a greater-than-expected fall in continuing claims.
Influential Fed official Eric Rosengren is scheduled to deliver an economic forecast today, which is sure to affect the outlook of the US economy.
Canadian Dollar
With the excitement of the recent interest rate freeze from the Bank of Canada (BOC) out of the way, markets turned their attention to domestic data. The Canadian Dollar softened, falling into negative territory against most of its major peers. This was partly due to a slump in the Ivey purchasing managers index for August, which tumbled from 57 past the forecast 56.5 all the way to 52.3. Data later in the day was positive and crude oil was on the rise, but the head of the Royal Bank of Canada (RBC) claimed that the Canadian economy needed to reinvent itself after the weakening in manufacturing and services since the financial crash. The process, he claimed, could take ten to fifteen years.
Canadian unemployment figures are expected to show a tightening in the labour market, with unemployment holding steady and 18,000 new jobs created. However, this may not overly boost the Canadian Dollar given that the rise is only just over half that of the previous month’s fall.
New Zealand Dollar
Profit-taking was weakening the New Zealand Dollar yesterday, with the ‘Kiwi’ sinking deep into negative territory against the Euro and the Australian Dollar. There was no domestic data on the calendar, leaving the New Zealand Dollar without support.
Credit card spending figures for August are scheduled to be released today, with no changes predicted to the rate of growth.
Data Released
September 9th 08.45 NZD Card Spending Retail (MoM) (AUG) 0.3%
September 9th 11.30 AUD Home Loans (JUL) -1.5%
September 9th 16.00 EUR German Trade Balance (Euros) (JUL)
September 9th 18.30 GBP Total Trade Balance (Pounds) (JUL) -£4200
September 9th 22.30 CAD Unemployment Rate (AUG) 6.9%