Australian Dollar
August’s TD securities inflation estimate did not offer the ‘Aussie’ any particular support at the start of the week. As the estimate dipped on the year from 2.7% to 2.6% this gave markets fresh reason to doubt the likelihood of the Reserve Bank of Australia (RBA) returning to a tightening bias in the near future. Coupled with the latest escalation in global geopolitical tensions this left the Australian Dollar to trend lower against many of the majors on Monday.
The mood towards the antipodean currency could sour further this afternoon, though, if the RBA expresses any fresh concerns over the relative strength of AUD exchange rates.
Sterling
As the UK construction PMI surprised to the downside this left the Pound on a weaker footing overnight. Investors were not impressed to find that growth in the domestic construction sector had slowed to a one-year low in August. However, as construction accounts for only a small proportion of the UK gross domestic product the negative impact of this disappointing showing was somewhat limited. Even so, this still undermined confidence in the economic outlook, provoking a bout of jitters ahead of this evening’s more critical services PMI.
If the service sector also shows a loss of momentum this could weigh heavily on the Pound, particularly if the wider sense of Brexit-based uncertainty persists.
Euro
Although the Eurozone producer price index failed to pick up as far as forecast this was not enough to prevent the Euro strengthening further. While weaker producer prices do not bode well for the inflationary outlook investors were still encouraged to pile into the single currency. In large part this was thanks to the persistent weakness of the US Dollar, even as the wider sense of market risk appetite faded. A surprise uptick in the Eurozone Sentix investor confidence index also helped to buoy the appeal of the Euro.
Any softening in July’s Eurozone retail sales figures may dent EUR exchange rates, though, with weaker consumer spending likely to give European Central Bank (ECB) policymakers little cause for confidence.
US Dollar
With US markets closed to mark Labour Day on Monday the ‘Greenback’ struggled to find any major source of support. Even though safe-haven demand strengthened in response to the latest North Korean nuclear test this failed to particularly benefit the US Dollar, which remains muted thanks to domestic political concerns. Fears of a potential government shutdown may keep a lid on USD exchange rates in the near term, particularly if the Trump administration continues to push for funding of its controversial border wall.
As July’s factory orders are forecast to show a sharp contraction on the month this could add to the pressure on the US Dollar, further reducing the chances of the Federal Reserve raising interest rates again before the end of the year.
Canadian Dollar
With some US refineries starting to come back online in the wake of Hurricane Harvey this knocked back oil prices. The general increase in risk aversion also weighed on the oil market, leaving the Canadian Dollar to trend lower at the start of the week. Although investors have hopes for the Bank of Canada (BOC) policy decision later this week this was not enough to prevent CAD exchange rates from slumping.
If risk appetite remains lacking today this could exacerbate the bearishness of the Canadian Dollar further.
New Zealand Dollar
Tensions over the upcoming election have continued to mount as markets move to price in the potential of a Labour upset. As the New Zealand Dollar lacked any support from market risk appetite this left the antipodean currency vulnerable to downside bias. With the Reserve Bank of New Zealand (RBNZ) unhappy with the relative strength of the ‘Kiwi’ and signs pointing towards a weaker domestic economy NZD exchange rates trended lower at the start of the week.
However, if the ANZ commodity price index shows an improvement on the month this could boost the New Zealand Dollar, in the short term at least.
Data Released
September 5th 09:30 AUD Services PMI (AUG)
September 5th 11:00 NZD ANZ Commodity Price Index (AUG)
September 5th 14:30 AUD Reserve Bank of Australia Rate Decision 1.5%
September 5th 18:30 GBP Services PMI (AUG) 53.5
September 5th 19:00 EUR Eurozone Retail Sales (YoY) (JUL) 2.5%
September 6th 00:00 USD Factory Orders (JUL) -3.3%