Australian Dollar
As risk appetite generally diminished at the start of the week the ‘Aussie’ was prompted to trend lower against many of the majors. However, the Australian Dollar was able to gain ground against other risk-sensitive currencies thanks to an uptick in the TD Securities inflation estimate. The measure rose from 2.3% to 2.7% in July, suggesting that inflationary pressure is continuing to mount within the Australian economy. Naturally this raised hopes that the Reserve Bank of Australia (RBA) could be encouraged to shift its policy outlook sooner rather than later, limiting the downside potential of the ‘Aussie’.
Even so, the RBA is not expected to make any change in monetary policy at today’s meeting, which could encourage AUD exchange rates to soften.
Sterling
Even though UK consumer credit rose to its highest level since the 2008 financial crisis, topping 200 billion, this was not enough to particularly weigh down the Pound. While the Bank of England (BoE) has already highlighted concerns over the increasing reliance on credit amongst domestic households Sterling largely shrugged off this discouraging development. In large part GBP exchange rates benefitted from the weakness of the other majors, with worries over Brexit also easing somewhat.
If July’s manufacturing PMI points towards sustained growth within the sector this could prompt the Pound to extend its recent gains further this evening.
Euro
In another positive development for the single currency the Eurozone unemployment rate was found to have dipped to a fresh eight-year low at 9.1%. Coupled with a modest uptick in the core Eurozone consumer price index this suggested that the currency union has continued to strengthen. While markets still doubt that the European Central Bank (ECB) will begin tapering its quantitative easing program any time soon this positive data was still enough to shore up the Euro on Monday.
A strong showing from the second quarter Eurozone gross domestic product data should give the Euro fresh cause for confidence tonight.
US Dollar
Mounting geopolitical tensions over the controversial Venezuelan constitutional election saw markets favouring safe-haven currencies such as the US Dollar. As the US threatened sanctions in response to the apparent erosion of democracy investor jitters increased, pushing the ‘Greenback’ higher across the board. A disappointing Chicago PMI failed to hamper USD exchange rates, even though the world’s largest economy continues to show relatively mixed signs of health.
Greater volatility could be in store for the US Dollar, though, if June’s personal consumption expenditure indicates any softening in domestic inflationary pressure.
Canadian Dollar
Confidence in the ‘Loonie’ deteriorated even in the wake of Friday’s unexpectedly strong gross domestic product report. As the industrial product price index showed a sharp contraction on the month the mood towards the Canadian Dollar soured. Even as Brent crude rallied strongly on the back of potential sanctions on the Venezuelan oil supply the general increase in market risk aversion still weighed on CAD exchange rates.
Any weakening in the latest Canadian manufacturing PMI may see the ‘Loonie’ extending its slump overnight.
New Zealand Dollar
Both the ANZ activity outlook and business confidence measures weakened in July, undermining optimism in the robustness of the New Zealand economy. Coupled with the dominant atmosphere of risk aversion this left the New Zealand Dollar trending lower across the board. In the absence of supportive domestic data the ‘Kiwi’ also ceded ground to its antipodean cousin.
The New Zealand Dollar will remain at the mercy of wider market developments today, creating the potential for further NZD exchange rate weakness.
Data Released
August 1st 09:30 AUD Manufacturing PMI (JUL)
August 1st 14:30 AUD Reserve Bank of Australia Rate Decision 1.50%
August 1st 18:30 GBP Manufacturing PMI (JUL) 54.5
August 1st 19:00 EUR Eurozone Gross Domestic Product (2Q) 2.1%
August 1st 22:30 USD Personal Consumption Expenditure Core (YoY) (JUN) 1.4%
August 1st 23:30 CAD Manufacturing PMI (JUL)