Australian Dollar
As the latest Westpac consumer confidence index showed a marked weakening on the month the mood towards the ‘Aussie’ soured. While Australian home loans showed a solid rebound on the month this was not enough to offer any particular support to the antipodean currency. Escalating tensions between the US and North Korea also encouraged investors to sell out of the risk-sensitive Australian Dollar in favour of safe-haven assets. With worries over a potential hot conflict mounting overnight the ‘Aussie’s quickly extended its losses.
If August’s consumer inflation expectation report impresses investors this could offer AUD exchange rates support, even though persistent risk aversion is likely to limit any gains in the near term.
Sterling
Demand for the Pound picked up somewhat during Wednesday’s European session even in the absence of any significant domestic data. Although Brexit-based speculation continued this was somewhat eclipsed by the general increase in global geopolitical risk, helping to improve the appeal of Sterling relative to some of the other majors. The latest Bank of England (BoE) Agents’ summary of business conditions painted a rather mixed picture of the domestic economy, though, highlighting the continued weakness of wage growth and slight easing in consumer spending growth.
Volatility is likely for the Pound tonight with the release of June’s raft of UK production and trade data, with any improvement on the month likely to bolster market sentiment.
Euro
Even though Italian industrial production rose by a bullish 5.3% on the year in June this was not enough to shore up the single currency. While these latest signs of strength from the ailing Italian economy were a positive sign for the health of the wider Eurozone investors were not particularly encouraged. Instead the Euro came under pressure as a result of rising global tensions, which saw it ceding fresh ground to the safe-haven US Dollar.
The mood towards the Euro is likely to remain bearish today, particularly if investors continue to pile into the ‘Greenback’.
US Dollar
Increasingly incendiary rhetoric from both the US and North Korea triggered volatility for the markets, with investors spooked by the prospect of an armed conflict between the two states. This helped to buoy the US Dollar against many of the majors, although other safe-haven currencies benefitted more strongly from the widespread decline in risk appetite. As MBA mortgage applications also picked up solidly on the week ‘Greenback’ remained on a stronger footing overnight.
Confirmation that the US labour market continues to tighten could come from the latest jobless claims figures, offering further support to the US Dollar.
Canadian Dollar
Optimism in the health of the Canadian housing market improved on the back of stronger-than-expected housing starts and building permits figures. Both pointed towards greater demand within the market, suggesting that the domestic economy remains in a robust state. However, with increased global political tensions putting renewed downside pressure on oil prices the Canadian Dollar struggled to capitalise on this positive data.
Even so, if tonight’s new housing price index also offers evidence of a strengthening housing market this may give the ‘Loonie’ a rallying point.
New Zealand Dollar
July’s ANZ Truckometer did not offer any particular encouragement to the New Zealand Dollar, with the -5.5% contraction suggesting that domestic inflationary pressure remains limited. Even so, the losses of the ‘Kiwi’ were somewhat limited as markets continued to brace for today’s Reserve Bank of New Zealand (RBNZ) policy meeting. This allowed the New Zealand Dollar to make modest gains against both the ‘Aussie’ and the ‘Loonie’ in spite of the general decrease in risk appetite.
However, if the RBNZ delivers a dovish message on monetary policy this could see the New Zealand Dollar slump sharply across the board.
Data Released
August 10th 07:00 NZD Reserve Bank of New Zealand Rate Decision 1.75%
August 10th 11:00 AUD Consumer Inflation Expectation (AUG)
August 10th 18:30 GBP Industrial Production (MoM) (JUN) 0.1%
August 10th 18:30 GBP Visible Trade Balance (JUN) -11 billion
August 10th 22:30 CAD New Housing Price Index (YoY) (JUN)
August 10th 22:30 USD Initial Jobless Claims (AUG 05) 240,000