Australian Dollar
Risk appetite boosted the ‘Aussie’ as markets were disappointed by Fed Chair Janet Yellen’s Jackson Hole speech. With the Federal Reserve now looking less likely to achieve a third interest rate hike before the end of the year commodity prices were boosted by a softening US Dollar. This helped to overshadow the less positive mood surrounding the Australian economy, with the bullish trend of base metal prices limiting the downside potential of AUD exchange rates.
While the ‘Aussie’ may struggle to extend its gains today there could be a fresh rallying point in store on the back of Tuesday’s ANZ Roy Morgan weekly consumer confidence index.
Sterling
Comments from Foreign Secretary Boris Johnson helped to shore up demand for the Pound during Friday’s European session. As Johnson acknowledged that the UK will have to pay its EU divorce bill this gave rise to fresh hopes that the Conservative government is softening its approach to Brexit. This encouraged investors to continue to favour Sterling, although the persistent uncertainty surrounding the outcome of negotiations soon started to undermine its latest gains.
As the UK and EU teams return to the negotiating table this week the Pound is likely to see further volatility, particularly if there are no signs of progress towards any sort of agreement.
Euro
Even though the German IFO business climate index bettered expectations, showing a modest dip from 116 to 115.9 in August, this was not enough to prompt a rally for the Euro. Markets were instead discouraged by the more disappointing aspects of the second quarter German gross domestic product report. As exports showed a more significant slowdown on the quarter optimism in the outlook of the Eurozone’s powerhouse economy faltered, denting the appeal of the single currency.
As the GfK German consumer confidence index is also expected to show a moderation in September the Euro is unlikely to return to a stronger footing in the near term.
US Dollar
While markets had hoped to see some fresh hints as to the Federal Reserve policy outlook in Janet Yellen’s Jackson Hole speech they were ultimately disappointed. As the Fed Chair failed to allude to the likely timing of the next interest rate hike the mood towards the US Dollar soured markedly. Even though a December move remains a possibility the increased divide amongst Fed policymakers has not inspired particular investor confidence in the odds of a third 2017 rate hike.
As forecasts point towards a widening of the advance goods trade deficit this could add to the bearishness of USD exchange rates tonight.
Canadian Dollar
As oil production off the coast of Texas shut down in anticipation of Hurricane Harvey the price of Brent crude trended higher once again. Even so, the Canadian Dollar struggled to make any gains on the back of this as the dent to global oil supplies is unlikely to last for long. With markets still doubtful over the ongoing commitment of OPEC members to their production-limiting agreement CAD exchange rates were lacking in any particular support ahead of the weekend.
If oil prices reverse their recent gains this could see the Canadian Dollar come under additional pressure today.
New Zealand Dollar
Although the ‘Kiwi’ found some support ahead of the weekend this was not enough to reverse the week’s overall downtrend. Confidence in the antipodean currency remained largely muted thanks to the Treasury’s downgraded growth forecasts, with a lack of fresh domestic data offering investors little incentive to favour the New Zealand Dollar. The fragility of wider market risk appetite also limited the upside potential of NZD exchange rates.
It will be a quiet start to the week in terms of New Zealand data, exposing the ‘Kiwi’ to further downside pressure.
Data Released
August 28th 22:30 USD Advance Goods Trade Balance (JUL) -65.2 billion
August 29th 09:30 AUD ANZ Roy Morgan Weekly Consumer Confidence Index
August 29th 16:00 EUR German GfK Consumer Confidence Survey (SEP) 10.7