Australian Dollar
Investors were disappointed as the second quarter Australian gross domestic product data fell short of forecast, even though growth still picked up strongly on the quarter. This dented confidence in the domestic outlook, underlining the likelihood of the Reserve Bank of Australia (RBA) keeping interest rates on hold for longer. With market risk appetite faltering once again over the state of tensions on the Korean peninsula there was little reason to favour the ‘Aussie’ on Wednesday.
Any widening of the Australian trade surplus in July could help to shore up AUD exchange rates once again, though.
Sterling
In the absence of any fresh UK data the mood towards the Pound nevertheless held up, in large part thanks to technical resistance. Markets were able to shake off the latest bout of Brexit jitters relatively quickly, taking heart from the significant backlash to a leaked government proposal on immigration. Even so, as any real clarity on the likely outcome of Brexit negotiations remains elusive the upside potential of GBP exchange rates is still rather limited.
Developments in the domestic political landscape could provoke further volatility for the Pound later today, with jitters likely to increase in anticipation of the upcoming vote on the repeal bill.
Euro
July’s German industrial production figures proved disappointing, with orders found to have unexpectedly contracted by -0.7% on the month. However, this failed to put particular pressure on the single currency as the German retail PMI rebounded strongly from 50.7 to 53.0 in August. While this painted a somewhat mixed picture of the Eurozone’s powerhouse economy the Euro was still able to trend higher against many of the majors overnight. Calls for the European Central Bank (ECB) to abandon its easy monetary policy also supported demand.
If the ECB does take a more hawkish stance at its September policy meeting this could encourage further Euro strength today.
US Dollar
With Federal Reserve policymakers offering cautions over the prospect of a third 2017 interest rate hike the appeal of the ‘Greenback’ soured. Although July’s US trade balance bettered expectations the deficit nevertheless continued to widen, limiting confidence in the outlook of the world’s largest economy. Even so, as the ISM non-manufacturing composite demonstrated a solid uptick on the month this offered some measure of support to USD exchange rates.
If the latest jobless claims figures point towards renewed tightening of the US labour market, though, the US Dollar could return to a bullish trend.
Canadian Dollar
Demand for the ‘Loonie’ surged overnight as the Bank of Canada (BOC) surprised markets with an interest rate hike. This saw interest rates rise for the second time in as many months, entirely reversing the policy easing of 2015. Naturally this points towards a greater level of confidence in the domestic economy, encouraging CAD exchange rates to trend sharply higher across the board. With Brent crude also pushing towards the US$54 per barrel mark there was nothing to diminish the appeal of the Canadian Dollar.
The ‘Loonie’ could unwind some of its gains today, however, if building permits are found to have contracted on the month in July.
New Zealand Dollar
Resurgent market jitters over North Korea returned the ‘Kiwi’ to a downtrend, with the prospect of a continued escalation of tensions encouraging investors to pile back into less risk-sensitive assets. As speculation over the New Zealand election also persisted this helped to keep NZD exchange rates under pressure. Even suggestions of a less hawkish Fed were not enough to particularly bolster the New Zealand Dollar yesterday.
The softness of the ‘Kiwi’ is likely to persist ahead of the weekend with no fresh New Zealand data available to distract investors.
Data Released
September 7th 09:30 AUD Construction PMI (AUG) 61
September 7th 11:30 AUD Trade Balance (JUL) 950 million
September 7th 16:00 EUR German Industrial Production (YoY) (JUL) 4.6%
September 7th 21:45 EUR European Central Bank Rate Decision 0.00%
September 7th 22:30 CAD Building Permits (MoM) (JUL) -1.0%
September 7th 22:30 USD Initial Jobless Claims (SEP 02) 242,000