Australian Dollar
With the Reserve Bank of Australia (RBA) looking set to leave interest rates on hold for some time to come the Australian Dollar remained on a softer footing. As the volume of credit card purchases eased in June this further dented confidence in the outlook of the domestic economy. A raft of disappointing Chinese data added to the bearish mood of the ‘Aussie’, pointing towards a weakening of commodity demand in the world’s second largest economy.
If the RBA’s August meeting minutes confirm that the central bank remains on a neutral policy bias demand for the Australian Dollar is likely to remain limited.
Sterling
The mood towards Sterling remained relatively muted at the start of the week, with markets bracing for the release of July’s UK consumer price index report. Even though the odds of the Bank of England (BoE) returning to a tightening bias in the near future are distinctly limited there is still speculation that higher inflationary pressure could provoke a move. With forecasts pointing towards a fresh uptick in inflation this has encouraged investors to brace, limiting the momentum of the Pound.
However, if inflation fails to strengthen as expected this could leave the Pound vulnerable to a sharp downturn this evening.
Euro
Eurozone industrial production proved weaker than forecast in June, with output contracting -0.6% on the month. This offered little encouragement to the single currency, particularly as Portugal’s second quarter gross domestic product showed a sharp loss of momentum on the quarter. Commentary from Bundesbank director Andreas Dombret also weighed on EUR exchange rates, increasing the likelihood of the European Central Bank (ECB) leaving its quantitative easing program in place for the foreseeable future.
However, if the German gross domestic product is found to have risen further in the second quarter this could offer the Euro a rallying point.
US Dollar
Some of the disappointment of Friday’s US consumer price index data wore off on Monday, even though tensions between the US and North Korea did not escalate any further over the weekend. Demand for the US Dollar remained solid thanks to the discouraging nature of the latest Chinese data, giving investors little incentive to sell out of the safe-haven currency in favour of higher-yielding assets.
As tonight’s advance retail sales figure is forecast to show a solid rebound on the month this should offer further support to the ‘Greenback’.
Canadian Dollar
In spite of the latest signs that oil demand from China is continuing to weaken the Canadian Dollar trended higher against many of its rivals at the start of the week. As oil prices remained in a relatively positive position, albeit a somewhat stagnant one, the downside pressure on CAD exchange rates was relatively limited. Even so, in the absence of any supportive Canadian data demand for the ‘Loonie’ is still somewhat fragile.
Any fresh deterioration in market risk appetite is likely to undermine the strength of CAD exchange rates today.
New Zealand Dollar
Although New Zealand retail sales defied market expectations to strengthen on the quarter this failed to boost NZD exchange rates. Investors were more concerned by a sharp dip in July’s services PMI, which points towards a loss of momentum within the domestic economy. With risk appetite still limited this left the New Zealand Dollar to trend lower against many of the majors at the start of the week.
With no fresh New Zealand data set for release today the ‘Kiwi’ is likely to remain largely biased to the downside.
Data Released
August 15th 11:30 AUD Reserve Bank of Australia August Meeting Minutes
August 15th 16:00 EUR German Gross Domestic Product (YoY) (2Q) 1.9%
August 15th 18:30 GBP Consumer Price Index (YoY) (JUL) 2.7%
August 15th 22:30 USD Advance Retail Sales (JUL) 0.4%