Australian Dollar
While the headline Australian employment change figure bettered expectations this growth was primarily driven by an increase in part-time employment. As a result the mood towards the ‘Aussie’ failed to particularly pick up on Thursday, with confidence in the labour market dented even as the participation rate improved. Even so, this was not seen to be enough to materially alter the policy outlook of the Reserve Bank of Australia (RBA), limiting the Australian Dollar’s downside bias.
Wider market sentiment will be the primary driving force for AUD exchange rates ahead of the weekend, with any deterioration in risk appetite likely to prompt fresh losses.
Sterling
Although UK retail sales proved stronger than forecast in July this was not enough to fuel a particular rally for the Pound. Investors were discouraged by the fact that June’s figures had been revised lower, with the underlying details of the report suggesting that consumers are continuing to rein in their spending. With the squeeze on household finances unlikely to ease significantly any time soon the outlook for consumer spending, and wider economic growth, remains muted at best.
With the Conservative government starting to clarify some of its position on Brexit speculation over the potential outcome of negotiations is likely to provoke further volatility for the Pound in the coming days.
Euro
Investors were not encouraged by the European Central Bank’s (ECB) monetary policy minutes, which proved rather dovish in tone. As policymakers expressed concern over the relative strength of the Euro, and its negative implications for trade conditions, EUR exchange rates extended their recent downtrend further. Altogether the central bank does not look to be in any hurry to begin tapering its quantitative easing program in the near future, limiting the appeal of the single currency.
Even if Eurozone construction output remained robust in June the Euro may struggle to capitalise on anything short of a major upside surprise today.
US Dollar
The latest raft of US data proved rather mixed, although signs of continued tightness in the labour market helped to keep the ‘Greenback’ on a steady footing. Even so, with July’s industrial and manufacturing production figures highlighting a loss of momentum within the domestic economy the appeal of the US Dollar was still dented. After the more dovish nature of the Federal Open Market Committee’s (FOMC) July meeting minutes the prospect of another 2017 interest rate hike looks limited, diminishing the underlying support for USD exchange rates.
If August’s University of Michigan confidence index indicates that domestic sentiment is improving, though, the US Dollar could see some renewed bullishness tonight.
Canadian Dollar
As Canadian manufacturing shipments showed an unexpectedly sharp contraction of -1.8% on the month in June the ‘Loonie’ came under renewed pressure. This weaker showing undermined confidence in the underlying strength of the domestic economy, raising the prospect of the Bank of Canada (BOC) returning to a more dovish policy outlook in the coming months. With Brent crude still struggling to pull away from the region of US$50 per barrel the upside potential of the Canadian Dollar remains limited.
CAD exchange rates could find a rallying point tonight, however, as forecasts point towards an uptick in the Canadian consumer price index.
New Zealand Dollar
A slight improvement in the ANZ consumer confidence index failed to offer particular support to the New Zealand Dollar yesterday. This modest recovery in consumer sentiment was not enough to reverse all of July’s decline, however, limiting its positive impact on the ‘Kiwi’. Investors continued to lack any substantial incentive to favour the higher-yielding currency at this juncture, even as global geopolitical tensions showed no fresh signs of escalation.
In the absence of any fresh New Zealand data the ‘Kiwi’ is unlikely to gain any particular traction against rivals ahead of the weekend.
Data Released
August 18th 16:00 EUR German Producer Price (YoY) (JUL) 2.2%
August 18th 19:00 EUR Eurozone Construction Output (YoY) (JUN) 2.5%
August 18th 22:30 CAD Consumer Price Index (YoY) (JUL) 1.2%
August 19th 00:00 USD University of Michigan Confidence Index (AUG P) 94