Australian Dollar
There was no surprise in store for markets as the Reserve Bank of Australia (RBA) left interest rates on hold once again at its September meeting. However, while there was no change in monetary policy at this juncture the mood towards the Australian Dollar still picked up on Tuesday. As policymakers maintained a relatively upbeat outlook on both domestic and global growth this encouraged the ‘Aussie’ to trend higher across the board, even after a disappointing services PMI.
AUD exchange rates could extend this bullish run further if the second quarter Australian gross domestic product shows a fresh uptick in growth.
Sterling
The Pound found some support overnight in spite of the disappointing nature of August’s UK services PMI. While the service sector lost some of its momentum on the month this was not enough to particularly spook investors, with the index still some way from contraction territory. Even so, this weaker showing does not bode overly well for the domestic outlook, particularly in the absence of any tangible progress towards a final Brexit deal.
With fresh domestic data lacking today Sterling may come under renewed pressure, as investors still lack a substantial incentive to pile into the currency.
Euro
As Eurozone retail sales contracted -0.3% on the month in July, in line with forecasts, this left the single currency on a softer footing. Investors were also discouraged by the finalised raft of services PMIs, which showed a weakening in the Italian, French and Spanish figures. This indicates that the currency union is not in the most robust state of health at this juncture, giving policymakers less reason to consider tightening monetary policy at the next European Central Bank (ECB) meeting.
Even so, if this afternoon’s German factory orders figures show an improvement this could still shore up the Euro in the short term.
US Dollar
With risk aversion easing somewhat as the initial impact of North Korea’s latest nuclear test faded demand for the US Dollar softened. Comments from Federal Reserve policymaker Laen Brainard added to the bearish mood of the ‘Greenback’ overnight, as she called for greater caution on the subject of interest rates. Even though Brainard is a notoriously dovish member of the Federal Open Market Committee (FOMC) this still prompted investors to pile out of USD exchange rates, denting the odds of any imminent rate hike.
Any signs of weakness from tonight’s trade balance and ISM non-manufacturing composite index results could see the US Dollar extend its losses further.
Canadian Dollar
Even as oil prices surged higher once again, supported by a temporary easing in market worries over North Korea, the Canadian Dollar continued to lack any particular strength. While risk appetite picked up this failed to boost the ‘Loonie’, although CAD exchange rates still made some gains against its lower-yielding rivals. In large part the Canadian Dollar was hampered as markets began to brace for tonight’s Bank of Canada (BOC) policy decision.
However, if policymakers adopt a more hawkish tone with regards to monetary policy this could see the ‘Loonie’ rallying strongly overnight.
New Zealand Dollar
Although the ANZ commodity price index continued to show a contraction in August the ‘Kiwi’ surged higher yesterday. A modest uptick in the Global Dairy Trade auction helped to ease concerns over the health of the dairy market, offering further support to the New Zealand Dollar as market risk appetite generally improved. While jitters over the upcoming election are unlikely to significantly ease any time soon this was not enough to dampen the mood of the ‘Kiwi’.
In the absence of any New Zealand data today NZD exchange rates may struggle to hold onto this strength for long, though.
Data Released
September 6th 11:30 AUD Gross Domestic Product (YoY) (2Q) 1.8%
September 6th 16:00 EUR German Factory Orders (YoY) (JUL) 5.8%
September 6th 22:30 USD Trade Balance (JUL) -44.5 billion
September 7th 00:00 CAD Bank of Canada Rate Decision 0.75%
September 7th 00:00 USD ISM Non-Manufacturing Composite (AUG) 55.5