Australian Dollar
August’s NAB business confidence index dropped sharply on the month, falling from 12 to 5 as the mood of domestic businesses soured. This weighed heavily on the Australian Dollar yesterday, particularly when coupled with disappointing credit card data. As signs pointed towards weakness within the Australian economy this gave investors no real incentive to favour the ‘Aussie’, even as the general sense of market risk appetite remained elevated.
However, if the Westpac consumer confidence index shows an improvement in September this could offer the ‘Aussie’ a rallying point today.
Sterling
Investors were surprised to find that the UK consumer price index had strengthened further than forecast in August. As inflation accelerated from 2.6% to 2.9% on the year this encouraged speculation that the Bank of England (BoE) could move to a more hawkish footing at its September meeting. Even though this also signalled a worsening of the squeeze on household finances that was not enough to prevent the Pound from trending higher across the board.
While an uptick in average weekly earnings is forecast for the three months to July this is unlikely to ease concerns over the pay squeeze, leaving the Pound vulnerable to downside pressure.
Euro
Confidence in the single currency remained somewhat muted on Tuesday, with investors still discouraged by the dovishness of recent European Central Bank (ECB) policymaker comments. The appeal of the Euro was also tempered as centrist French President Emmanuel Macron faced the first major demonstrations over his proposed labour law changes. Even so the single currency was still able to make gains against some of its weaker rivals overnight.
A strong showing from July’s Eurozone industrial production figures could offer EUR exchange rates greater support, though.
US Dollar
Although the NFIB small business optimism index unexpectedly showed a modest uptick on the month this failed to particularly shore up USD exchange rates. As the US continues to count the damage of Hurricane Irma demand for the ‘Greenback’ eased once again. With the odds of a December interest rate hike from the Federal Reserve looking a little more limited the US Dollar struggled to gain any particular traction against its rivals.
The appeal of the US Dollar is unlikely to materially improve today, unless there is a particular deterioration in market risk appetite.
Canadian Dollar
As OPEC revised its global oil demand forecasts for both this year and the next upwards oil prices remained on a generally strong footing. However, this was not enough to shore up the Canadian Dollar overnight as the mood towards the commodity-correlated currency soured markedly. After the strong gains seen on the back of the Bank of Canada (BOC) interest rate hike the upside potential of the ‘Loonie’ has diminished considerably.
In the absence of any fresh domestic data the Canadian Dollar looks set to remain in a soft state today.
New Zealand Dollar
The ‘Kiwi’ rallied strongly on the back of the latest ANZ truckometer heavy reading, which showed a solid rebound of 6.2% on the month in August. This encouraged hopes that inflationary pressure within the New Zealand economy is still building, reducing the likelihood of the Reserve Bank of New Zealand (RBNZ) taking a more dovish view. As a result the New Zealand Dollar made bullish gains across the board.
A similarly strong result from August’s New Zealand food price index could add to bets that inflation is picking up, extending the gains of the ‘Kiwi’.
Data Released
September 13th 08:45 NZD Food Prices (MoM) (AUG)
September 13th 10:30 AUD Westpac Consumer Confidence (SEP)
September 13th 18:30 GBP Average Weekly Earnings (3M/YoY) (JUL) 2.3%
September 13th 19:00 EUR Eurozone Industrial Production (YoY) (JUL) 3.3%