Australian Dollar
While July’s building approvals data showed a smaller-than-expected contraction on the year this was not enough to shore up the antipodean currency yesterday. Markets were still disappointed to find that approvals had contracted by a sharp -13.9%, a result which further undermined confidence in the domestic outlook. This left the ‘Aussie’ on a generally softer footing overnight, particularly as investor anticipation for the Trump administration’s latest attempt to push through its tax reform promises.
If private sector credit continued to pick up in July this could offer the Australian Dollar a rallying point, providing that the general sense of market risk appetite does not deteriorate further.
Sterling
Demand for Sterling got a boost on Wednesday as July’s UK net consumer credit figure surprised to the downside. As the Bank of England (BoE) has recently warned over the dangers of the increasing reliance on credit amongst households this slight slowdown in credit growth was greeted positively. With mortgage approvals found to have picked up strongly on the month this added to the more optimistic mood of GBP exchange rates, bolstering confidence in the domestic outlook.
However, as the GfK consumer confidence survey is expected to show a fresh dip in sentiment this could quickly reverse the Pound’s improvement this morning.
Euro
Even though the German consumer price index rose from 1.7% to 1.8% on the year as forecast the Euro struggled to capitalise on this bullish data. After the marked gains seen on the back of European Central Bank (ECB) President Mario Draghi’s recent comments the single currency encountered psychological resistance, preventing it from climbing to any fresh highs. The chances of the ECB returning to a tightening bias in the near future remain limited in spite of rising German inflation, with policymakers likely to still view much of the uptick as the result of temporary factors.
Nevertheless, a similarly strong showing from today’s Eurozone consumer price index may help to shore up EUR exchange rates in the short term.
US Dollar
Both the ADP employment change figure and the annualised second quarter US gross domestic product bettered expectations overnight, returning the US Dollar to a strong uptrend. These latest signs of strength from the world’s largest economy helped to improve the appeal of the ‘Greenback’, especially as markets awaited details of Trump’s tax reform plans. The sharp uptick in the headline ADP figure bodes well for the corresponding non-farm payrolls report, encouraging hopes of greater Federal Reserve hawkishness.
Jitters could be in store for the US Dollar, though, if July’s personal consumption expenditure core disappoints, given that this is the Fed’s preferred measure of inflation.
Canadian Dollar
A larger-than-expected dip in US crude oil inventories failed to prevent Brent crude prices from slipping, removing support from the Canadian Dollar. As the second quarter Canadian current account deficit widened from -12.9 billion to -16.3 billion confidence in the domestic economy remained somewhat limited. With USD exchange rates recovering ground the ‘Loonie’ was left to trend lower across the board.
Hopes for tonight’s gross domestic product data are not high, with the Canadian Dollar likely to be weighed down by an easing in growth momentum.
New Zealand Dollar
As New Zealand building permits continued to decline in July the mood towards the ‘Kiwi’ deteriorated once again. With the appeal of higher-yielding currencies weakening in response to the US Dollar’s latest rally there was little reason for investors to favour the New Zealand Dollar. Comments from outgoing Reserve Bank of New Zealand (RBNZ) Governor Graeme Wheeler did not do anything to improve the footing of NZD exchange rates.
The latest ANZ activity outlook index may offer support to the New Zealand Dollar this morning, unless signs continue to point towards a weaker domestic economy.
Data Released
August 31st 09:01 GBP GfK Consumer Confidence Survey (AUG) -13
August 31st 11:00 NZD ANZ Activity Outlook (AUG)
August 31st 11:30 AUD Private Sector Credit (YoY) (JUL) 5.4%
August 31st 19:00 EUR Eurozone Consumer Price Index (YoY) (AUG) 1.4%
August 31st 22:30 CAD Gross Domestic Product (YoY) (JUN) 4.1%
August 31st 22:30 USD Personal Consumption Expenditure Core (YoY) (JUL) 1.4%