Australian Dollar
Risk appetite fell through the floor yesterday, with all eyes on the day’s approaching speeches by Federal Reserve officials. As a result, the Australian Dollar tumbled against all but its commodity peers as traders turned away from high-risk assets. Meanwhile, domestic credit card purchase data showed a slight softening in consumer credit, with purchases easing from AU$25.5 billion to AU$23.6 billion, while balances softened from AU$52.2 billion to AU$51.3 billion.
Australia’s key data this week will be Thursday’s employment change and unemployment rate figures for August. Unemployment is expected to hold steady at 5.7%, while 15k new jobs are forecast to have been created.
Sterling
Cold risk-appetite meant that the Australian Dollar couldn’t make gains against the Pound, despite the numerous headwinds facing Sterling. The British Chambers of Commerce significantly cut its growth forecasts for this year and the next, predicting growth of 1% in 2017 after earlier estimates of 2.3%. Meanwhile Standard & Poor’s warned that the supposed rebound seen in the latest post-Brexit data could be a ‘mirage’ and that the reports did nothing to clarify the picture of the UK economy going forward. There was no domestic data on the calendar to provide support but because of the hype surrounding the Federal Reserve, the AUD/GBP exchange rate remained bearish.
The most important UK development this week will be the Bank of England’s (BoE) interest rate decision on Thursday. No changes are expected after the last huge round of policy changes, although Governor Mark Carney may signal that further stimulus will be necessary in the near-term.
Euro
The Euro was bullish against the Australian Dollar and supported against the majority of its peers yesterday by developments within the bond markets. Investors were selling assets after Mario Draghi’s admission last week that the European Central Bank (ECB) hadn’t even discussed quantitative easing; markets had been expecting tweaks to the programme. Bond markets became more dovish and the sell-off signalled that investors not only have reduced expectations that the ECB will up its stimulus measures, but that it may even begin to scale QE back. This boosted the Euro, allowing for strong gains.
On Tuesday the Euro could find support from the latest Eurozone ZEW survey. The economic sentiment index is predicted to climb from 4.6 to 6.7.
US Dollar
A bullish start for the US Dollar somewhat faltered later in the session, although not enough to alleviate the downward pressure on commodity assets. The ‘Greenback’ had started the day riding high on the increased bets of a Federal Reserve rate hike in December, with hopes having been kindled by comments last week from John Williams, Eric Rosengren and Esther George. However, further Fed remarks, this time from Dennis Lockhart, that it would require a ‘serious discussion’ about whether or not it is currently the right time to raise interest rates. The more dovish tone caused traders to pause and the implied probability of a hike in December was reigned back again to show a majority of just a couple of percentage points.
US advance retail sales figures for August could further improve the odds of monetary tightening in December from the Federal Reserve due to the forecast 0.2% growth after the previous stagnation at 0%.
Canadian Dollar
Oil wasn’t performing well yesterday, keeping the Canadian Dollar on bearish form throughout the session. US Dollar strength was weakening commodities to begin with, but rumours surrounding the Organisation for the Petroleum Exporting Countries (OPEC) further sapped trader appetite. After the excitement caused by talks of a production freeze, the cartel released production forecasts that showed output would be 180,000 barrels per day higher than initially expected.
Canada’s data docket is almost empty this week, with a lecture by the Bank of Canada’s (BOC) Carolyn Wilkins on Wednesday the most notable development.
New Zealand Dollar
Unlike its commodity peers, the New Zealand Dollar was posting bullish – and surprising – gains yesterday, although it remained weak versus Pound Sterling. The presence of particularly strong GDP data later in the week is keeping appetite for the ‘Kiwi’ in strong demand, despite what should be the weakening effect of low risk-appetite among the markets.
Thursday’s second-quarter New Zealand GDP figures are likely to provide strong support for the ‘Kiwi’ considering the forecasts are for a quarter-on-quarter acceleration from 0.7% to 1.1% and a year-on-year acceleration from 2.8% to 3.6%.
Data Released
September 13th 19.00 EUR Eurozone ZEW Survey (Economic Sentiment) (SEP) 6.7
September 14th 20.15 CAD Bank of Canada’s Wilkins Lecture in London UK
September 15th 08.45 NZD Gross Domestic Product (YoY) (2Q) 3.6%
September 15th 11.30 AUD Unemployment Rate (AUG) 5.7%
September 15th 21.00 GBP Bank of England Rate Decision (SEP 15) 0.25%
September 15th 22.30 USD Advance Retail Sales (AUG) 0.2%