Australian Dollar
The latest report from credit ratings agency Moody’s failed to particular improve the appeal of the Australian Dollar. While the ratings agency noted that Australia’s AAA rating is not at risk this was coupled with a warning that government debt is expected to mount further over the coming year. This did not paint the most encouraging picture of the economic outlook, adding to the bearishness of the ‘Aussie’ as risk appetite generally evaporated.
In the absence of any fresh Australian data the ‘Aussie’ could extend its downtrend further today, especially if market jitters continue to mount.
Sterling
As the second estimate of the second quarter UK gross domestic product also pointed towards a modest uptick in growth on the quarter this offered support to the Pound. Investors failed to pay much heed to the less encouraging details of the report, even though business investment was found to have stagnated and consumer spending weakened. Although confidence in the UK economy remains somewhat limited the lack of any downside revision to the headline figure kept GBP exchange rates from softening further, at least for the time being.
Any fresh developments in the Brexit discussion could provoke Sterling volatility ahead of the weekend.
Euro
Confirmation that growth in the Spanish economy had accelerated from 0.8% to 0.9% on the quarter gave investors fresh cause for confidence in the Euro yesterday. Even so, the mood towards the single currency remained a little muted as markets continued to brace for European Central Bank (ECB) President Mario Draghi’s Jackson Hole speech. The odds of Draghi offering any new insight into the ECB’s monetary policy outlook have diminished sharply, eroding some of the Euro’s earlier support.
If the German IFO business climate index suggests that the Eurozone’s powerhouse economy is experiencing a loss of confidence this could add to the bearishness of EUR exchange rates this afternoon.
US Dollar
Comments from Kansas City Fed president Esther George boosted bets that the central bank could still raise interest rates a third time before the end of the year. As George took a distinctly hawkish tone the US Dollar was encouraged to trend higher against many of the majors. However, as the latest jobless claims figures proved rather mixed in nature this helped to temper any ‘Greenback’ bullishness. With confidence in the underlying health of the world’s largest economy still somewhat limited USD exchange rates struggled to gain any significant traction overnight.
However, if Fed Chair Janet Yellen also takes a hawkish tone in her Jackson Hole speech this could buoy the US Dollar to fresh gains.
Canadian Dollar
In spite of the wider decline in market risk appetite the Canadian Dollar remained on a stronger footing against its rivals. With oil prices still benefitting from the latest drawdown in US crude inventories the downside potential of the ‘Loonie’ was relatively limited, even on the back of hawkish Fed comments. As investors still see the Bank of Canada (BOC) as being on course to raise interest rates again this kept a solid floor under the Canadian Dollar.
With no new Canadian data set for release today CAD exchange rates may struggle to hold onto these gains for long, though.
New Zealand Dollar
Even though July’s trade balance remained in a state of surplus this was not enough to shore up the New Zealand Dollar on Thursday. With the general sense of market risk aversion on the rise once again the appeal of the ‘Kiwi’ naturally diminished, especially on the back of the latest hawkish Fed comments. Given that NZD exchange rates have broken through some key levels in recent days the upside potential of the antipodean currency has diminished, leaving it vulnerable to further declines.
If tonight’s Fed commentary adds to the odds of a December interest rate hike this is likely to weigh heavily on the ‘Kiwi’.
Data Released
August 25th 16:00 EUR German Gross Domestic Product (YoY) (2Q F) 2.1%
August 25th 18:00 EUR German IFO Business Climate (AUG) 115.5
August 25th 22:30 USD Durable Goods Orders (JUL P) -6.0%
August 26th 00:00 USD Fed Chair Yellen speaks at Jackson Hole
August 26th 05:00 EUR ECB President Draghi speaks at Jackson Hole