Australian Dollar
Confidence in the health of the Australian economy improved on Friday, prompted by a solid uptick in August’s manufacturing PMI. As the domestic manufacturing sector continued to perform strongly this boosted the appeal of the antipodean currency, particularly as many of the majors suffered fresh slumps ahead of the weekend. A marked improvement in the latest commodity index also added to a more positive ‘Aussie’ outlook, increasing the traction of AUD exchange rates.
Any weakening in the TS securities inflation forecast could weigh heavily on the Australian Dollar, though, with markets still pricing out the likelihood of any imminent return to hawkishness from the Reserve Bank of Australia (RBA).
Sterling
While the UK manufacturing PMI bettered expectations, rising from 55.3 to 56.9 in August, the Pound struggled to capitalise on this positive showing. The negative impact of Brexit uncertainty continued to weigh on GBP exchange rates heading into the weekend, with markets discouraged by the lack of progress seen in the latest round of talks. Even though the domestic economy continues to show signs of holding up under pressure investors did not see this as sufficient reason to favour Sterling.
Even so, if the corresponding construction PMI shows a similar improvement on the month this could encourage greater support for the Pound.
Euro
A modest downward revision to the finalised German manufacturing PMI did little to support the single currency on Friday. Even though signs for the Eurozone as a whole continued to point towards a solid level of economic resilience demand for the Euro remained distinctly limited. In part this was due to decreasing confidence in the prospect of the European Central Bank (ECB) beginning to taper its quantitative easing program in the near future.
This evening’s Eurozone producer price index data could put increased pressure on the Euro if signs point towards a weakening in domestic inflationary pressure, further denting the odds of a hawkish ECB outlook.
US Dollar
Friday’s non-farm payrolls report proved unexpectedly weak, with the unemployment rate rising back to 4.4% as the labour market failed to take in more slack. However, this discouraging data did not keep the US Dollar on the back foot for long as markets dismissed its implications for the Federal Reserve policy outlook. With markets still hopeful that policymakers will achieve a third interest rate hike before the end of the year the downside potential of the ‘Greenback’ remains somewhat limited.
In the absence of any fresh domestic data the US Dollar may struggle to regain its bullishness today, especially if scepticism over the abilities of the Trump administration sees a resurgence.
Canadian Dollar
Even though the August manufacturing PMI showed a slight easing in sector growth on the month the Canadian Dollar maintained its positive form. Investors were still encouraged in the wake of Thursday’s better-than-expected gross domestic product data, with hopes for the Bank of Canada (BOC) policy meeting rising. With the BOC looking more likely to adopt a hawkish tone at its September meeting and oil prices still buoyant CAD exchange rates continued to trend higher.
If the oil market returns to a more bearish state at the start of the week, though, this could reverse some of the Canadian Dollar’s recent gains.
New Zealand Dollar
As the second quarter terms of trade index failed to strengthen as far as forecast this left the ‘Kiwi’ on a weaker footing ahead of the weekend. While the underlying details of the report continued to point towards a resilient domestic economy this was not enough to counteract the general softness of NZD exchange rates. As election jitters have started to build investors saw little reason to buy back into the New Zealand Dollar.
Ahead of tomorrow’s Global Dairy Trade auction the mood towards the ‘Kiwi’ is unlikely to significantly pick up in the near term.
Data Released
September 4th 11:00 AUD TD Securities Inflation (YoY) (AUG)
September 4th 18:30 GBP Construction PMI (AUG) 52.2
September 4th 19:00 EUR Eurozone Producer Price Index (YoY) (JUL) 2.2%