Australian Dollar
As the Reserve Bank of Australia (RBA) took a more optimistic view on the domestic economy this encouraged the ‘Aussie’ to trend higher against many of the majors. Even so, while the RBA sounded more upbeat this did not boost the odds of any interest rate hike coming in the near future. A solid uptick in the ANZ Roy Morgan weekly consumer confidence index also helped to bolster the appeal of the Australian Dollar on Tuesday.
A similarly positive showing from this morning’s Westpac leading index could allow the ‘Aussie’ to extend its gains further, unless market risk appetite deteriorates once again.
Sterling
The latest comments from Bank of England (BoE) Governor Mark Carney failed to boost the Pound, even though he echoed the hawkish message that monetary policy is likely to need tightening ‘in the coming months’. Markets are showing increasing scepticism over the likelihood of the BoE actually raising interest rates, suspecting that this is a case of jawboning. Worries over the stability of the Conservative government also weighed on GBP exchange rates, with the latest Brexit row still rumbling on.
Any decline in UK retail sales could diminish the appeal of the Pound further today, pointing towards a weaker economic outlook.
Euro
Better-than-expected German and Eurozone ZEW economic sentiment surveys shored up the Euro yesterday. With confidence across the currency union showing a solid improvement investors were encouraged to pile back into the Euro, especially as July’s Eurozone current account surplus also widened. While this is unlikely to be enough to prompt a more hawkish outlook from the European Central Bank (ECB) the positive data still boosted demand for the single currency in the short term.
EUR exchange rates could strengthen further if Germany’s producer price index shows an uptick, with any signs of rising inflationary pressure likely to be greeted by investors.
US Dollar
The ‘Greenback’ did not take any encouragement from Donald Trump’s appearance at the UN, with tensions over North Korea looking set to remain elevated for some time to come. August’s US housing starts figure also disappointed, failing to show a rebound on the month as the housing market remains under pressure. This is unlikely to give the Federal Reserve particular cause for confidence, keeping the US Dollar on a weaker footing overnight.
Volatility is likely for USD exchange rates in response to the Federal Open Market Committee (FOMC) policy decision, with any action on the matter of the balance sheet likely to boost the ‘Greenback’.
Canadian Dollar
July’s manufacturing sales contracted further than forecast on the month, clocking in at -2.6% rather than the expected -1.9%. This gave investors no reason to favour the Canadian Dollar, prompting CAD exchange rates to trend lower once again. Reports that the Bank of Canada (BC) is closely watching the strength of the ‘Loonie’ added to the bearish mood, reducing the odds of any further monetary tightening moves.
With markets expecting to see another uptick in US crude oil inventories this week the appeal of the ‘Loonie’ is unlikely to improve in the near term.
New Zealand Dollar
Even though the third quarter Westpac consumer confidence index dipped slightly this failed to particularly dampen the mood towards the ‘Kiwi’. An uptick in the Global Dairy Trade index offered support to NZD exchange rates, suggesting that the outlook for the domestic dairy industry is improving. With election-based jitters somewhat limited at this juncture the New Zealand Dollar was able to make fresh gains across the board.
However, if the second quarter current account deficit-GDP ratio remains negative this could take some of the wind out of the NZD’s sails.
Data Released
September 20th 08:45 NZD Current Account Deficit-GBP Ratio (2Q) -3.1%
September 20th 10:30 AUD Westpac Leading Index (MoM) (AUG)
September 20th 16:00 EUR German Producer Price Index (YoY) (AUG) 2.5%
September 20th 18:30 GBP Retail Sales (YoY) (AUG) 1.4%
September 21st 04:00 USD Federal Open Market Committee Decision 1.25%