Australian Dollar
There was some disappointment as the ANZ Roy Morgan weekly consumer confidence index weakened further, giving investors fresh reason to sell out of the ‘Aussie’. This did not offer any particular encouragement as to the strength of the domestic economy, suggesting that households are likely to rein in spending. With the initial improvement in risk appetite seen at the start of the week starting to ease there was little in the way of support for the Australian Dollar on Tuesday.
As markets brace for the start of the Jackson Hole symposium and the latest commentary from major central bank policymakers the mood towards the ‘Aussie’ is likely to remain relatively muted.
Sterling
The Australian Dollar was able to record strong gains versus the Pound yesterday after markets reacted negatively to the latest UK government borrowing figures. GBP initially rose following the spending data, as it showed a higher-than-expected surplus in July and a downwards revision to the scope of June’s deficit. However, markets were more hung up on the fact that borrowing so far this tax year is now 9% higher than the previous fiscal period. The Pound quickly rode back on those gains and fell into negative territory.
Gloom surrounding public finances could continue to benefit AUD/GBP today, as there is no economic data due from the UK.
Euro
Yesterday’s ZEW sentiment survey figures pushed the Euro lower against most of its peers after showing a sharp drop in confidence surrounding both the German and Eurozone economies. The index of investor sentiment regarding the German economy fell from 17.5 to 10, far below forecasts of a drop to 15, while the Eurozone sentiment figure dropped to 29.3 instead of to 34.2. ZEW claimed that the German index was still high despite the fall, but markets weren’t convinced.
Changes to the monetary policy outlook could upset the Euro today, as European Central Bank (ECB) President Mario Draghi is scheduled to speak in Lindau, Germany.
US Dollar
Confidence in the ‘Greenback’ was quick to pick back up overnight, with investors encouraged by an unexpectedly steady Richmond Fed manufacturing index. This suggested that the US economy remains in a relatively robust state of health, even though a stronger showing here is unlikely to materially alter the policy outlook of the Federal Reserve. With no fresh signs of turmoil coming from the Trump White House USD exchange rates were able to return to a general uptrend.
With forecasts pointing towards a modest uptick in August’s US manufacturing and services PMIs the US Dollar could stand to extend its gains further tonight.
Canadian Dollar
As US crude oil stockpiles are expected to show their eighth consecutive weekly drawdown later today the Canadian Dollar was buoyed on the back of a fresh rally in oil prices. Although concerns remain over the commitment of OPEC members to the ongoing output-limiting agreement, with reports pointing towards a fall in compliance, this was not enough to prevent Brent crude from climbing. This positivity helped to overshadow somewhat disappointing Canadian retail sales figures, which showed growth of just 0.1% on the month in June.
If oil stockpiles are confirmed to have fallen once again this is likely to give the Canadian Dollar a fresh boost overnight.
New Zealand Dollar
A lack of data from New Zealand yesterday kept NZD on weak form, with markets looking ahead to the US Federal Reserve’s Jackson Hole symposium later in the week. Numerous policymakers are set to speak, so markets will get a much clearer picture of the interest rate outlook for the US – and potentially the Eurozone. This means commodity currencies could see serious volatility later in the week, leaving markets reluctant to buy into them until they know whether the outlook has improved or worsened.
As with yesterday, the New Zealand data calendar is empty today, leaving NZD at the mercy of speeches from Eurozone and US central bankers in the evening.
Data Released
August 23rd 17:00 EUR ECB’s Draghi Speaks in Lindau, Germany
August 23rd 18:00 EUR Eurozone Manufacturing PMI (AUG) 56.3
August 23rd 18:00 EUR Eurozone Services PMI (AUG) 55.4
August 23rd 23:45 USD Manufacturing PMI (AUG) 53.5
August 23rd 23:45 USD Services PMI (AUG) 54.9