Australian Dollar
Even though base metal prices remained on a bullish footing overnight this was not enough to shore up the Australian Dollar. As investors were inclined to sell out of higher-yielding currencies ahead of Friday’s Jackson Hole symposium AUD exchange rates struggled to find any particular traction. In the absence of fresh domestic data the appeal of the antipodean currency remained limited, with underlying confidence in the domestic economy still somewhat lacking.
As markets brace for the latest commentary from Federal Reserve policymakers the Australian Dollar looks set to remain biased to the downside, at least for the time being.
Sterling
As the government continued to set out its position on key issues surrounding Brexit the mood towards the Pound remained rather muted. While there were some signs that Theresa May’s rhetoric is softening this did not give investors particular cause for confidence, with the UK and EU still a long way from coming to any major agreements. The significant air of uncertainty that still surrounds negotiations kept Sterling on a relatively soft footing overnight.
Although no change is forecast for the second estimate of the second quarter gross domestic product the Pound could rally if the underlying details of the report suggest that the economy is continuing to hold up.
Euro
Naturally European Central Bank (ECB) Governor Mario Draghi did not offer any fresh insight on monetary policy in his comments in Lindau. This undermined hopes that the policymaker will give some manner of indication on quantitative easing at his Jackson Hole speech at the end of the week. However, demand for the Euro nevertheless picked up thanks to better-than-expected German manufacturing and services PMIs. As the Eurozone’s powerhouse economy demonstrated continued resilience this offered a solid boost to the single currency.
With no fresh Eurozone data set for release today the Euro could be driven lower by speculation over the likely message that Draghi will deliver ahead of the weekend.
US Dollar
Pressure mounted on the ‘Greenback’ as domestic data continued to paint a rather mixed picture, with August’s manufacturing PMI slumping from 53.3 to 52.5. Coupled with an unexpected contraction of -9.4% in new home sales on the month this undermined optimism in the health of the world’s largest economy. This did not do anything to improve the odds of the Federal Reserve continuing to tighten monetary policy in the near future, prompting the US Dollar to cede ground to many of the majors.
Another disappointing showing from tonight’s existing home sales data could encourage further USD exchange rate losses.
Canadian Dollar
While US crude oil stockpiles showed a smaller drawdown than forecast markets were still encouraged by this latest decline in inventories. Even so, as worries over the global oversupply glut seem unlikely to be truly dispelled any time soon Brent crude is likely to remain range-bound for some time to come. This leaves the Canadian Dollar vulnerable to downside pressure, especially as the general sense of market risk appetite remains fragile.
In the absence of any Canadian data releases the ‘Loonie’ may come under renewed pressure ahead of the weekend.
New Zealand Dollar
The ‘Kiwi’ plunged across the board yesterday as the New Zealand Treasury downgraded its growth outlook for both this fiscal year and the next. With the government now forecasting growth of 2.6% in the year to June as opposed to 3.2% this naturally undermined market confidence in the health of the domestic economy. This left the New Zealand Dollar to weaken sharply over the course of the day, especially as risk appetite eased somewhat.
If this morning’s raft of trade data shows that the trade balance returned to a state of deficit in July this could exacerbate the softness of the ‘Kiwi’.
Data Released
August 24th 08:45 NZD Trade Balance (JUL) -200 million
August 24th 18:30 GBP Gross Domestic Product (YoY) (2Q P) 1.7%
August 24th 22:30 USD Initial Jobless Claims (AUG 19) 238,000
August 25th 00:00 USD Existing Home Sales (MoM) (JUL) 0.5%