Australian Dollar
Even though the Australian manufacturing PMI demonstrated continued strong growth this was not enough to shore up the ‘Aussie’ on Tuesday. Investors were instead discouraged by the message from the Reserve Bank of Australia (RBA) policy meeting. While interest rates were left on hold, in line with expectations, policymakers took a cautious note on the negative influence that the strong Australian Dollar is having on domestic price pressures. This suggested that inflation is likely to remain lacklustre in the coming months, further limiting any chances of the RBA returning to a hawkish policy bias.
If building approvals contracted further in June this is likely to leave the Australian Dollar on a downtrend today, even if it is likely to find some support after Tuesday’s sharp decline.
Sterling
The UK manufacturing PMI bettered expectations in July, jumping from 54.2 to 55.1 as the sector continued to enjoy robust growth. This eased concerns over the outlook of the domestic economy, at least in the short term, and boosted hopes that the UK will start the third quarter on a stronger footing. Even so, as Downing Street appears keen to talk down any prospect of a softer Brexit process the bullishness of the Pound was somewhat tapered.
A similarly strong performance from July’s construction PMI may see GBP exchange rates extend their gains further this evening.
Euro
While the Eurozone second quarter gross domestic product report confirmed that the economy grew by a solid 0.6% on the quarter the mood towards the Euro remained generally bearish. Despite the Eurozone posting its seventeenth consecutive quarter of growth the single currency was unable to find any particular support. Investors were disappointed by downward revisions to the finalised German and French manufacturing PMIs, even though both major Eurozone economies continued to demonstrate robust health.
Any weakening in the latest Eurozone producer price index figures could weigh heavily on the Euro, with softness suggesting that inflationary pressure within the currency union is still relatively muted.
US Dollar
Chaos continued to grip the Trump White House following the latest firing, with communications director Anthony Scaramucci departing after just ten days in the post. This limited the appeal of the US Dollar even as market risk appetite diminished, with the prospect of promised tax reforms and infrastructure investment being delivered looking increasing unlikely. Demand was further dented by a weaker-than-expected ISM manufacturing PMI, which suggested that the US economy is not in such a robust state of health.
Volatility is expected in response to tonight’s ADP employment change measure, which could offer some indication as to the likely nature of Friday’s non-farm payrolls report.
Canadian Dollar
An uptick in the Canadian manufacturing PMI helped to buoy the Canadian Dollar, encouraging optimism in the domestic outlook. Rising oil prices also encouraged the commodity-correlated ‘Loonie’ to strengthen, with Brent crude prices supported by the mounting geopolitical tensions surrounding Venezuela.
However, if US crude stockpiles are found to have risen in the last week the Canadian Dollar is likely to come under renewed pressure thanks to the current atmosphere of market risk aversion.
New Zealand Dollar
The mood towards the ‘Kiwi’ soured further last night as the latest Global Dairy Trade auction saw a significant contraction in dairy prices. With investors already inclined to sell out of higher-risk assets thanks to the global geopolitical situation NZD exchange rates extended their slump on the back of this disappointment.
A rallying point could be in store for the New Zealand Dollar this morning, though, if the second quarter unemployment rate dips in line with forecasts.
Data Released
August 2nd 08:45 NZD Unemployment Rate (2Q) 4.8%
August 2nd 11:30 AUD Building Approvals (YoY) (JUN) -11.0%
August 2nd 18:30 GBP Construction PMI (JUL) 54
August 2nd 19:00 EUR Eurozone Producer Price Index (YoY) (JUN) 2.5%
August 2nd 22:15 USD ADP Employment Change (JUL) 190,000