Australian Dollar
There was some disappointment as the second quarter Australian import and export price indexes showed a larger contraction than forecast. Coupled with the recent dovishness of commentary from the Reserve Bank of Australia (RBA) the -5.7% contraction in export prices weighed heavily on the appeal of the Australian Dollar. However, the softness of the ‘Aussie’ was tempered by the unexpectedly cautious tone which the Federal Reserve took on the subject of inflation. As the odds of another imminent Fed interest rate hike diminished this helped to shore up the antipodean currency, although market risk appetite soon eased.
However, if the second quarter producer price index data also proves discouraging this could set the ‘Aussie’ on a downtrend going into the weekend.
Sterling
Although the Pound lost some of its momentum on Thursday investors were still encouraged by the latest CBI retail sales survey. Sales growth hit a three-month high in July as the index jumped from 12 to 22, signalling the continued optimism of consumers. While this bullishness is unlikely to last long, thanks to mounting pressure on wages, this positive showing helped to support the Pound, even as Brexit-based jitters persist.
As July’s GfK consumer confidence index is forecast to show a decline on the month the appeal of Sterling is likely to remain somewhat limited today.
Euro
Germany’s GfK consumer confidence index surprised to the upside, with the index strengthening from 10.6 to 10.8 for August. This latest sign of strength within the Eurozone’s powerhouse economy failed to particularly excite markets, though, even as the Spanish unemployment rate also demonstrated improvement. Anticipation for the latest German inflation data limited the appeal of the Euro, given that the European Central Bank (ECB) seems set to leave monetary policy looser for longer.
Any softening in the consumer price index could leave the single currency vulnerable to a sharp slump.
US Dollar
Fed policymakers proved more dovish than markets had anticipated at their July meeting, sounding a cautious note on the subject of inflation. This was seen to reduce the likelihood of the central bank raising interest rates again before the end of the year, putting pressure on the US Dollar. Even so, the mood towards the ‘Greenback’ soon improved as June’s durable goods orders surprised to the upside. The 6.5% increase in orders pointed towards a greater level of domestic confidence, suggesting that the underlying health of the world’s largest economy remains generally resilient.
If tonight’s second quarter annualised gross domestic product report also indicates robust growth USD exchange rates could experience a fresh bullish run.
Canadian Dollar
Even though oil prices remained relatively buoyant overnight this was not enough to shore up the Canadian Dollar. As sources within the Canadian government expressed some reservations over the Bank of Canada’s (BOC) decision to raise interest rates this month the mood towards the ‘Loonie’ soured. With the Fed looking set to pursue a less aggressive pace of monetary tightening the chances of a second 2017 rate hike from the BOC were also seen to decline.
Even so, if May’s gross domestic product data points towards greater strength within the economy the Canadian Dollar could return to a stronger footing this evening.
New Zealand Dollar
Lacking any support from fresh domestic data the New Zealand Dollar struggled to gain any traction against its rivals yesterday. As the initial boost from the unexpectedly cautious Fed message faded the ‘Kiwi’ came under renewed pressure, with market risk appetite soon diminishing as the latest US data bettered forecast.
Unless demand for higher-yielding currencies generally picks up ahead of the weekend the New Zealand Dollar looks set to extend its losses further.
Data Released
July 28th 09:01 GBP GfK Consumer Confidence Survey (JUL) -11
July 28th 11:30 AUD Producer Price Index (YoY) (2Q)
July 28th 22:00 EUR German Consumer Price Index (YoY) (JUL P) 1.5%
July 28th 22:30 CAD Gross Domestic Product (YoY) (MAY) 4.2%
July 28th 22:30 USD Gross Domestic Product (Annualised) (2Q) 2.5%