Australian Dollar
Despite July’s services PMI showing a solid uptick in growth on the month the mood towards the Australian Dollar remained bearish. Greater focus fell on the disappointing trade balance data, which showed a larger-than-expected narrowing of the trade surplus in June. This undermined confidence in the underlying health of the Australian economy further, encouraging investors to continue selling out of the ‘Aussie’ on Thursday. With global tensions still heightened there seemed little cause to favour the antipodean currency.
However, as the second quarter retail sales data is expected to show a strong improvement on the quarter this could offer the Australian Dollar a rallying point today.
Sterling
Although the UK services PMI bettered expectations this was not enough to keep the Pound on a bullish footing for long. Investors were soon discouraged by the persistent dovishness of the Bank of England (BoE), as only two policymakers voted for an immediate interest rate hike. Confidence was further dented as the Bank’s growth and wage forecasts were revised lower, suggesting that the domestic economy is likely to remain weighed down by Brexit-based uncertainty for some time to come. Altogether this left Sterling trending lower across the board.
In the absence of any fresh UK data GBP exchange rates look set to extend their losses heading into the weekend.
Euro
Demand for the single currency softened somewhat in the wake of more downward revisions to the Eurozone’s PMIs. Of particular concern were the latest signs that the German economy has lost some of its momentum at the start of the third quarter. This gave further weight to expectations that the European Central Bank (ECB) will leave monetary policy on hold for some time to come, especially in the wake of a less-than-hawkish Economic Bulletin.
Even so, if the latest German factory orders and retail PMI results prove positive this could still encourage the Euro to return to a stronger footing tonight.
US Dollar
The ISM non-manufacturing composite index surprised to the downside in July, sliding from 57.4 to 53.9 as the world’s largest economy continued to lose momentum. Even so, this disappointing showing was not enough to significantly dent the US Dollar. As markets braced for tonight’s labour market data the ‘Greenback’ avoided a major downtrend, although it remains distinctly vulnerable to any shifts in investor sentiment.
Focus will be on the latest wage growth data, in addition to the headline non-farm payrolls figure, with USD rates likely to weaken if earnings fail to show signs of improvement.
Canadian Dollar
While the oil market remained in a bullish mood overnight, continuing to trade on the sharper-than-expected drop in US inventories, the Canadian Dollar experienced a mixed day. Persistent worries over the sustainability of this latest uptick in oil prices hampered the ‘Loonie’, maintaining a downside bias. Investors were also somewhat reluctant to buy into the Canadian Dollar ahead of July’s labour market data, which may prove discouraging.
CAD exchange rates could be shored up if a larger number of people are found to have been added to the Canadian labour force in the last month.
New Zealand Dollar
Even though the ANZ commodity price index posted a contraction in July the ‘Kiwi’ was quick to shrug this off. The underlying details of the report were a little more positive, indicating that prices remain at a robust level at this juncture. While risk appetite remained relatively soft the New Zealand Dollar was still able to strengthen across the board, recovering some of the week’s losses.
Nevertheless, if the US Dollar rallies strongly this could leave the ‘Kiwi’ vulnerable to a fresh downtrend.
Data Released
August 4th 11:30 AUD Retail Sales Ex Inflation (QoQ) (2Q) 1.2%
August 4th 11:30 AUD RBA Statement on Monetary Policy
August 4th 16:00 EUR German Factory Orders (YoY) (JUN) 4.4%
August 4th 22:30 CAD Unemployment Rate (JUL) 6.5%
August 4th 22:30 USD Change in Non-Farm Payrolls 180,000