Australian Dollar
Even as the war of words between the US and North Korea continued to escalate ahead of the weekend this did not prevent the Australian Dollar making some solid gains. Markets have continued to increasingly shrug off any worries over the threat of heightened global geopolitical tensions, to the benefit of the commodity-correlated ‘Aussie’. In the absence of any fresh domestic data investors were also inclined to reassess the likelihood of the Reserve Bank of Australia (RBA) returning to a tightening bias, with markets showing greater optimism over the prospect once again.
Thanks to today’s public holiday the Australian Dollar may struggle to hold onto its gains, even if general market risk appetite remains solid.
Sterling
Theresa May failed to offer the Pound any encouragement during her much-anticipated speech on Brexit, prompting GBP exchange rates to slump sharply. While May did make mention of a potential transitional period this was quickly drowned out by other, rather more hard-line comments regarding membership of the single market and customs union. Altogether the message leaned towards a harder form of Brexit, prompting Sterling to trend lower across the board as investor hopes faded.
In the absence of any fresh UK data today the Pound is likely to remain under pressure thanks to Brexit-based worries.
Euro
Better-than-expected Eurozone manufacturing and services PMIs bolstered demand for the Euro, painting a more positive picture of the domestic outlook. A sharp uptick in German manufacturing sector growth proved particular encouraging for investors, indicating that the Eurozone’s powerhouse economy remains in a robust state of health. This strong showing could prompt European Central Bank (ECB) policymakers to take a more hawkish view, although the odds of any imminent tightening remain limited.
An uptick in the German IFO business sentiment survey could extend the gains of the single currency, adding to the pressure on policymakers to shift their outlook.
US Dollar
While San Francisco Fed President John Williams maintained a rather hawkish tone in his latest comments this was not enough to keep the US Dollar on a bullish run. As markets have already largely priced in the prospect of a December interest rate hike from the Federal Reserve the ‘Greenback’ is rather lacking in any further upside potential. A disappointing dip in the September services PMI gave investors further reason to sell out of USD exchange rates, particularly as risk appetite picked back up.
If the Chicago Fed national activity index demonstrates a rebound from July’s poor showing then the US Dollar could find a rallying point tonight.
Canadian Dollar
August’s Canadian consumer price index ultimately fell short of forecast, with inflation only accelerating 0.1% on the month. This further undermined the likelihood of the Bank of Canada (BOC) maintaining its hawkish policy outlook for long, denting confidence in the domestic economy. However, as the latest retail sales data proved rather positive this kept the Canadian Dollar from returning to a downtrend across the board.
Developments in the oil market could provoke volatility for the ‘Loonie’ today, with the global oversupply glut still hanging over the commodity.
New Zealand Dollar
Pre-election jitters did not trouble the ‘Kiwi’ on Friday, leaving the antipodean currency to make fresh gains against its weakening rivals. As polls had pointed towards an easing in support for the Labour party this helped to shore up NZD exchange rates, even though opinion polls have had a rather spotty track record in the last few years.
Ahead of Wednesday’s Reserve Bank of New Zealand (RBNZ) policy decision the mood towards the ‘Kiwi’ is likely to remain relatively muted.
Data Released
September 25th 18:00 EUR German IFO Business Climate (SEP) 115.9
September 25th 22:30 USD Chicago Fed National Activity Index (AUG) 0.11