Australian Dollar
Minutes from the Reserve Bank of Australia’s (RBA) latest monetary policy meeting showed that the central bank had moved away from its easing bias. The bank commented that recent data remained in line with the bank’s recent forecast and that housing market pressures had eased. This, combined with statements indicating policymakers believed the current level of monetary policy was adequate to stimulate price growth towards the target 2-3% caused strong appreciation for the ‘Aussie’.
The Westpac leading index for August is due for release, but the biggest driver of Australian Dollar movement will come from today’s Bank of Japan (BoJ) meeting and tomorrow morning’s Federal Reserve meeting.
Sterling
Brexit warnings were once again weighing on Pound Sterling yesterday, allowing the Australian Dollar to trend bullishly. The AUD/GBP exchange rate charged higher after it was revealed that 5,500 firms make use of the UK’s passporting rights to operate across the European Union. It had been warned on Monday that the UK could lose those rights and yesterday’s figures highlighted just how much of an impact that could have. Meanwhile, a forecast suggested exports would drop by 8% and the Czech State Secretary for EU Affairs stated that there was ‘zero chance for the UK to have their cake and eat it’ with regards to securing single market access without free movement.
Public sector borrowing figures are expected to reveal a major slump back into deficit, which is likely to severely weaken the Pound.
Euro
Eurozone developments were thin on the ground on Tuesday, leaving the Euro largely weak due to the proximity of today’s Bank of Japan (BoJ) and tomorrow’s Federal Reserve policy meetings. Also weighing on the common currency was a continued decline for German producer prices, with monthly prices unexpectedly contracting instead of stagnating. Falling factory gate prices do not bode well for consumer price growth, suggesting Germany’s battle with weak inflation is set to continue.
There is no Eurozone data on the calendar today.
US Dollar
Overall the US Dollar was weak yesterday, with bullish forecasts of an interest rate hike from the Fed early tomorrow made by Barclays and BNP Paribas doing nothing to stoke ‘Greenback’ appetite. While traders knew the day’s slew of poor economic data wouldn’t alter the Fed’s decision this month, long term hopes of a December hike were thrown into question. Housing starts collapsed -5.8%, nearly three-and-a-half times more than forecast, while the number of building permits issued posted another consecutive month of decline.
With the Federal Reserve’s next interest rate decision under 24 hours away, the US Dollar is likely to remain weak during today’s session in anticipation.
Canadian Dollar
Earlier excitement at the prospect of a deal between oil producers to cut down on output quickly faded, causing WTI to drop below US$43 and Brent towards US$45. The Canadian Dollar unsurprisingly weakened in response.
On a domestic front, Doug Porter, Chief Economist for the Bank of Montreal, warned that the Canadian government’s plans for fiscal stimulus may be slightly overrated. While the International Monetary Fund (IMF) have praised Canada’s plan to stimulate economic growth with government infrastructure spending, there are concerns that the regional governments will not be able to afford to contribute to stimulus.
In positive news, the German government secured the support of minor coalition party the Social Democratic Party (SPD) in order to support the EU’s Comprehensive Economic Trade Agreement (CETA) with Canada.
Low-impact Canadian wholesale sales figures are due for release today.
New Zealand Dollar
Low rate hike expectations from the Federal Reserve were allowing the New Zealand Dollar to trend bullishly yesterday. Dairy prices rose again at the latest GlobalDairyTrade auction, but the 1.7% growth represented a serious slowdown on previous gains, which had clocked in at between 6% and 12% over the last three events. Nonetheless, continuing upside risks for dairy prices was received positively.
Net migration and credit card spending figures are scheduled for publication today.
Data Released
September 21st 10.30 AUD Westpac Leading Index (MoM) (AUG)
September 21st 13.00 NZD Credit Card Spending (YoY) (AUG)
September 21st 18.30 GBP Public Sector Net Borrowing (Pounds) (AUG) 10.4b
September 21st 21.00 USD MBA Mortgage Applications (SEP 16)
September 21st 22.30 CAD Wholesale Sales (MoM) (JUL) 0.2%