Australian Dollar
Although the Reserve Bank of Australia (RBA) offered a fresh warning over the relative strength of the ‘Aussie’ the mood towards AUD exchange rates remained generally bullish ahead of the weekend. While policymakers are concerned that the strong Australian Dollar is having a detrimental impact on domestic growth this was not enough to discourage investors, particularly as the latest retail sales figures proved positive. Consumer spending jumped sharply by 1.5% in the second quarter, pointing towards greater domestic confidence and offering the ‘Aussie’ a fresh rallying point.
Even so, if this morning’s construction PMI fails to impress the Australian Dollar could be vulnerable to renewed downside pressure.
Sterling
In the wake of the Bank of England’s (BoE) dovish policy meeting and downgraded forecasts the Pound continued to cede ground to its rivals. Investors saw little reason to favour Sterling as the odds of any BoE interest rate hike looked distinctly diminished for the foreseeable future. A sharp fall in UK new car sales added to the bearishness of GBP exchange rates during Friday’s European session, suggesting that consumer sentiment has continued to sour under Brexit-based uncertainty.
Demand for the Pound is unlikely to pick up particularly today, although the size of its recent decline could encourage some degree of support in the short term.
Euro
Markets were unimpressed by the latest raft of Eurozone retail PMIs, denting the appeal of the single currency. While the Italian retail sector showed some improvement on the month this was not enough to balance out disappointingly soft showings from France, Germany and the Eurozone as a whole. As the currency union appears to have started the third quarter on a weaker footing EUR exchange rates were encouraged to trend lower, particularly as the outlook of the European Central Bank (ECB) remains relatively dovish.
However, another strong showing from the latest German industrial production figures may offer the Euro a rallying point this afternoon.
US Dollar
Political concerns continued to hamper the ‘Greenback’ over the course of the last week, with fresh jitters provoked by the intensification of the investigation in alleged collusion between the Trump election campaign and the Russian state. However, the US Dollar regained some of its strength in response to a better-than-expected labour market report. As employment continued to pick up and average earnings edged higher this helped to shore up USD exchange rates, even though questions remain over the underlying health of the US economy.
Nevertheless, if confidence in the Trump White House continues to deteriorate this could easily reverse the US Dollar’s recent gains.
Canadian Dollar
While the Canadian unemployment rate unexpectedly fell from 6.5% to 6.3% in July this failed to particularly boost the ‘Loonie’. In large part this was thanks to the fact that the corresponding participation rate slumped sharply, indicating that a significant number of Canadians had exited the labour market. As a result the report was less than encouraging, leaving the Canadian Dollar struggling to find any particular traction against its rivals.
Ongoing volatility in the oil market is likely to keep CAD exchange rates under pressure for the foreseeable future.
New Zealand Dollar
Even though domestic data was lacking on Friday the New Zealand Dollar benefitted from the weakness of many of the other majors. A general improvement in market risk appetite also continued to support the ‘Kiwi’, in spite of lingering worries over the outlook of the domestic economy.
Greater volatility is likely in store for the antipodean currency once the Reserve Bank of New Zealand (RBNZ) two-year inflation expectation report for the third quarter is published. Any signs of hawkishness could give the ‘Kiwi’ a fresh boost.
Data Released
August 7th 09:30 AUD Construction PMI (JUL) 56.5
August 7th 13:00 NZD Reserve Bank of New Zealand 2-Year Inflation Expectation (3Q)
August 7th 16:00 EUR German Industrial Production (MoM) (JUN) 3.4%
August 8th 00:00 USD Labour Market Conditions Index Change (JUL) 2