Australian Dollar
Confidence in the ‘Aussie’ faltered somewhat in response to the news that North Korea had fired another missile over Japan. The ensuing escalation in global geopolitical tensions weighed on the commodity-correlated currency, giving investors little reason to buy into the Australian Dollar on Friday. However, as the latest raft of US data proved rather disappointing this offered some support to AUD exchange rates, with the odds of another imminent Federal Reserve interest rate hike diminished.
Ahead of the release of the latest Reserve Bank of Australia (RBA) meeting minutes tomorrow the Australian Dollar may struggle to find any particular strength against its rivals.
Sterling
GBP exchange rates continued their bullish run ahead of the weekend, with investors encouraged by the latest comments from Bank of England (BoE) policymaker Gertjan Vlieghe. Once the most dovish member of the Monetary Policy Committee (MPC), Vlieghe echoed the more hawkish tone of the September meeting minutes. This saw markets continuing to price in greater odds of an imminent interest rate hike, driving the Pound higher across the board.
If BoE Governor Mark Carney also adopts a hawkish tone in comments later today this could boost the appeal of the Pound further.
Euro
Although the Eurozone trade surplus narrowed further than forecast this failed to particularly weigh on the single currency. Unexpectedly strong second quarter wage growth data boosted hopes that the European Central Bank (ECB) will begin to taper its quantitative easing program sooner rather than later. The Euro also benefitted from the softness of the US Dollar, especially as the appeal of more risk-sensitive assets diminished in response to a deterioration in market sentiment.
While no change is expected from the finalised Eurozone consumer price index for August this could offer EUR exchange rates some support, giving policymakers continued cause for confidence.
US Dollar
The ‘Greenback’ slumped sharply in response to a surprise contraction in August’s advance retail sales data. As sales growth slipped from 0.3% to -0.2% this dented confidence in the resilience of the US economy, indicating that the negative impact from Hurricane Harvey had been more marked than previously thought. With the damage from Hurricane Irma yet to feed through into the data this gave investors little cause for optimism in the domestic outlook.
A dip in the NAHB housing market index is unlikely to encourage a US Dollar rally overnight, unless safe-haven demand also picks up significantly in the meantime.
Canadian Dollar
While oil prices remained on track for their largest weekly gain since July this failed to offer any particular support to the commodity-correlated Canadian Dollar. A moderate rebound in the latest Canadian existing home sales data was also not enough to shore up the ‘Loonie’, which came under renewed pressure ahead of the weekend. This was largely due to a general decrease in market risk appetite, particularly as the upside potential of CAD exchange rates were limited by technical resistance.
With no fresh Canadian date due for release today the ‘Loonie’ is likely to remain under pressure from its bullish rivals.
New Zealand Dollar
Even though the New Zealand housing market continued to demonstrate signs of weakness demand for the ‘Kiwi’ remained solid. August’s manufacturing PMI proved rather more encouraging, strengthening from 55.5 to 57.9 as the sector continued to experience robust growth. This suggests that the New Zealand economy is still in a rather resilient state of health, helping to keep NZD exchange rates on a stronger footing.
A similarly positive showing from this morning’s services PMI could bolster the appeal of the New Zealand Dollar further, reducing the likelihood of any Reserve Bank of New Zealand (RBNZ) dovishness.
Data Released
September 18th 08:30 NZD Services PMI (AUG) 56.4
September 18th 09:01 GBP Rightmove House Prices (YoY) (SEP)
September 18th 17:00 GBP BoE Governor Carney Speech
September 18th 19:00 EUR Eurozone Consumer Price Index (YoY) (AUG F) 1.5%
September 19th 00:00 USD NAHB Housing Market Index (SEP) 67