Australian Dollar
Risk appetite generally improved ahead of the weekend, offering fresh support to the Australian Dollar. The latest developments in the US helped to improve the appeal of commodity-correlated currencies, as market confidence in the Trump administration’s ability to deliver on its infrastructure and tax reforms promises diminished. With base metal prices also pushing higher there was little reason for investors not to favour the ‘Aussie’ during Friday’s European session.
As long as market sentiment does not deteriorate significantly the Australian Dollar may be able to gain further ground today, even in the absence of domestic data.
Sterling
Demand for the Pound remained largely muted as markets continued to absorb July’s less-than-encouraging UK retail sales report. As signs generally point towards consumers reining in spending, which could lead to further weakening of economic growth, the upside potential of GBP exchange rates looks limited. This has kept Sterling on a weaker footing, particularly as Brexit negotiations continue to produce a significant degree of uncertainty for the domestic outlook.
Even so, if this morning’s Rightmove house price report points towards a resilient UK housing market the Pound could recover some of its recent losses.
Euro
Although German producer prices edged unexpectedly higher on the month in July this failed to particularly boost the single currency. Even as the Eurozone continues to demonstrate signs of economic resilience the chances of the European Central Bank (ECB) beginning to taper its quantitative easing program in the near future remain slim. The Euro is unlikely to shake off the negative impact of the more dovish nature of July’s ECB meeting minutes in the near future.
With no fresh Eurozone data set for release today EUR exchange rates are likely to lack any particular support.
US Dollar
While the University of Michigan consumer confidence index unexpectedly jumped from 93.4 to 97.6 in August USD exchange rates remained on a downtrend. This was due to the ongoing controversy surrounding the Trump administration, with business leaders continuing to distance themselves in the wake of events in Charlottesville. Confidence in Trump’s ability to deliver on his pledged infrastructure investment and tax reforms continued to diminish, putting the ‘Greenback’ under pressure.
If the political situation deteriorates further this could see the US Dollar trending lower across the board, even if market risk appetite picks up.
Canadian Dollar
Inflationary pressure continued to build within the Canadian economy in July, rising 1.2% on the year. This uptick helped to boost CAD exchange rates, building on the sense of wider market risk appetite to send the ‘Loonie’ trending higher against even its commodity-correlated rivals. While inflation is still some way below the Bank of Canada’s (BOC) target this stronger showing still encouraged hopes of continued policymaker hawkishness.
Another positive result from tonight’s wholesale sales data may push the Canadian Dollar to extend its bullish run.
New Zealand Dollar
The ‘Kiwi’ also benefited from the softening of the US Dollar on Friday, with the antipodean currency shored up by the diminished prospect of another Fed interest rate hike. As tensions between the US and North Korea did not show any fresh signs of escalation the mood towards the New Zealand Dollar naturally improved.
This morning’s credit card spending figures could weigh heavily on the ‘Kiwi’, though, if consumer confidence shows any signs of deteriorating.
Data Released
August 21st 09:01 GBP Rightmove House Prices (YoY) (AUG)
August 21st 13:00 NZD Credit Card Spending (YoY) (JUL)
August 21st 18:30 GBP Public Sector Net Borrowing (JUL) -0.5 billion
August 21st 22:30 CAD Wholesale Sales (MoM) (JUN)