Australian Dollar
Even though the general sense of market risk aversion picked up in the wake of the North Korean missile launch this failed to keep the ‘Aussie’ on a bearish trend for long. With the US Dollar still soft on the back of the diminished odds of an imminent Federal Reserve interest rate hike the downside potential of the Australian Dollar has been limited. Coupled with a solid uptick in the ANZ Roy Morgan weekly consumer confidence index this offered AUD exchange rates robust support on Tuesday.
With forecasts pointing towards another sharp contraction in Australian building approvals, though, the Australian Dollar may struggle to hold onto its gains today.
Sterling
The mood towards the Pound remained generally bearish overnight, with worries over Brexit negotiations continuing to build. Markets are concerned that the latest round of talks between the UK and EU negotiators are likely to end with little in the way of progress, given that the two sides remain fundamentally at odds. As the latest Nationwide house price index indicated that the UK housing market is still losing momentum this added to Sterling’s downside bias.
If July’s UK consumer credit and mortgage approvals figures suggest that confidence within the domestic economy is continuing to weaken the Pound could extend its losses.
Euro
Confidence in the single currency improved on the back of an unexpected uptick in the German GfK consumer confidence survey, which rose to its highest level since October 2001. As sentiment in the Eurozone’s powerhouse economy remains distinctly optimistic this gave investors further reason to favour the Euro. Given European Central Bank (ECB) President Mario Draghi’s less dovish performance at the Jackson Hole economic symposium hopes have mounted that the central bank will begin to taper its quantitative easing program in the coming months.
EUR exchange rates could trend higher still this evening if the German consumer price index shows that domestic inflationary pressure has continued to mount.
US Dollar
While US consumer confidence strengthened significantly on the month in August the US Dollar was unable to capitalise on this positive showing. Demand for the ‘Greenback’ slumped as markets braced for the latest development in the Trump administration’s attempts to push through tax reforms. As tensions between the US and North Korea showed fresh signs of escalation this also weighed on USD exchange rates, with investors largely choosing to favour safe-haven rivals such as the Japanese Yen.
A more optimistic second estimate of the latest US gross domestic product data could offer the US Dollar a rallying point, however.
Canadian Dollar
With Texas oil production still offline this kept oil prices on a generally stronger footing, even though this temporary stalling of output is unlikely to have a lasting impact on the market. This was not enough to prevent the Canadian Dollar retreating, however, as July’s producer price index proved weaker than expected. As the -1.5% contraction in producer prices on the month suggests that inflationary pressure within the Canadian economy is softening the appeal of the ‘Loonie’ diminished.
The latest US crude oil inventories figures may bolster CAD exchange rates tonight, providing that stockpiles continue to fall on a weekly basis.
New Zealand Dollar
The negative impact of worries over North Korea started to ease during Tuesday’s European session, helping the ‘Kiwi’ to recover some of its lost ground. As the initial surge of risk aversion eased the appeal of the New Zealand Dollar improved, at least in the short term. Even so, this rally remains fragile thanks to the jittery nature of current market sentiment and the potential for a further deterioration in the global geopolitical situation.
July’s New Zealand building permits data could offer the ‘Kiwi’ stronger support, providing that the economy demonstrates signs of greater resilience.
Data Released
August 30th 08:45 NZD Building Permits (MoM) (JUL)
August 30th 11:30 AUD Building Approvals (YoY) (JUL) -16.6%
August 30th 18:30 GBP Net Consumer Credit (JUL) 1.5 billion
August 30th 18:30 GBP Mortgage Approvals (JUL) 65,500
August 30th 22:00 EUR German Consumer Price Index (YoY) (AUG P) 1.8%
August 30th 22:30 USD Gross Domestic Product (Annualised) (2Q S) 2.7%