Australian Dollar
Fresh hawkish signals from the Fed weighed heavily on the commodity-correlated ‘Aussie’, with signs continuing to point towards another imminent interest rate hike. With the Reserve Bank of Australia (RBA) looking unlikely to return to a monetary tightening bias in the near future this naturally dented the appeal of the antipodean currency. As the general sense of market risk aversion remained elevated there was little in the way of support for AUD exchange rates yesterday.
Any further escalation in global geopolitical tensions could prompt further losses for the Australian Dollar in the near term.
Sterling
While the CBI retail sales data pointed towards a sharp rebound in activity on the month – rising from -10 to 42 – this was not enough to keep the Pound on a stronger footing. Worries over Brexit dampened the appeal of Sterling once again, with investors still concerned that UK and EU negotiators are not making significant headway on key issues. A mounting row between Boeing and Bombardier also weighed on the domestic outlook, with a number of jobs at risk thanks to significant tariffs that the US has decided to impose on imports of the latter’s C-Series jet.
Comments from Bank of England (BoE) Governor Mark Carney could boost the Pound this evening, though, if he offers any signals that the central bank is likely to raise interest rates imminently.
Euro
Unexpectedly improved Italian business and consumer confidence index results failed to offer the Euro any particular rallying point yesterday. Investors similarly shrugged off a solid uptick in the Eurozone M3 money supply for August, with the sense of local political uncertainty still dominating. With Angela Merkel expected to remain tied up in coalition talks for some time to come, and respected finance minister Wolfgang Schäuble stepping down from his post, there was little reason to favour the Euro at this juncture. Spain’s attempts to prevent the planned Catalonian independence referendum added to the bearish mood of the single currency.
A stronger showing from tonight’s German consumer price index could shore up EUR exchange rates, with any uptick in inflationary pressure likely to be greeted by markets.
US Dollar
After Fed Chair Janet Yellen noted the danger in being too cautious with regards to monetary policy the chances of a third 2017 interest rate hike were seen to increase further. This boosted the US Dollar across the board, extending its recent bullish run. A better-than-expected rebound in August’s durable goods orders figure added to the appeal of the ‘Greenback’, suggesting that the world’s largest economy remains in a robust state of health.
Overnight the US Dollar may come under pressure, however, if the advance goods trade balance shows a widening deficit.
Canadian Dollar
Even though US crude oil inventories unexpectedly eased in the last week this was not enough to reignite the recent bullishness of oil prices. Profit taking saw oil driven away from the US$60 per barrel mark, although markets remain confident that prices are likely to remain on a stronger footing in the coming months. As an overwhelming majority of Iraqi Kurds voted in favour of independence there is the potential for further supply disruption in the region. However, the general mood of risk aversion limited the upside potential of the Canadian Dollar.
In the absence of any fresh domestic data today the ‘Loonie’ may struggle to find any fresh traction against its rivals.
New Zealand Dollar
After starting the week on a soft footing the New Zealand Dollar was able to regain some of its lost ground on Wednesday. While concerns over the domestic political situation persist the ‘Kiwi’ benefitted from technical support, even as the wider sense of market risk appetite remained limited. Even a bullish US Dollar was not enough to keep the commodity-correlated ‘Kiwi’ on a downtrend.
However, NZD exchange rates are likely to see increased volatility in the wake of this morning’s Reserve Bank of New Zealand (RBNZ) interest rate decision.
Data Released
September 28th 06:00 NZD Reserve Bank of New Zealand Rate Decision 1.75%
September 28th 18:15 GBP BoE’s Carney Speaks in London
September 28th 19:00 AUD RBA’s Debelle Speaks in London
September 28th 22:00 EUR German Consumer Price Index (YoY) (SEP P) 1.8%
September 28th 22:30 USD Advance Goods Trade Balance (AUG) -65.1 billion