Australian Dollar
Even though Australian private sector credit showed a solid uptick in August, strengthening 5.5% on the year, this failed to boost the ‘Aussie’ ahead of the weekend. As iron ore prices remained under sustained pressure the appeal of the commodity-correlated Australian Dollar was generally limited. With global demand for iron ore weakening the base metal was on track for its biggest monthly decline since May 2016, doing little to improve the mood towards the ‘Aussie’ on Friday.
A strong showing from today’s manufacturing PMI or TD Securities inflation gauge could offer a rallying point to AUD exchange rates, though.
Sterling
Demand for the Pound weakened dramatically ahead of the weekend as the second quarter UK gross domestic product was unexpectedly revised lower. This suggests that the economy is in a weaker state than previously thought, encouraging investors to sell out of the already softened Sterling. A larger-than-expected uptick in the latest net consumer credit figure also weighed on GBP exchange rates, undermining market hopes for an imminent Bank of England (BoE) interest rate hike.
Any weakening in September’s UK manufacturing PMI may prompt the Pound to extend its recent losses further, particularly if Brexit-based jitters persist.
Euro
While the Eurozone consumer price index failed to strengthen as forecast in September the mood towards the Euro remained bullish. The disappointing showing was generally eclipsed by a surprise dip in the German unemployment rate, which fell from 5.7% to 5.6% in September. Naturally this boosted confidence in the underlying health of the Eurozone’s powerhouse economy, even though inflationary pressure across the currency union remains weaker than hoped for.
If the Eurozone unemployment rate shows a similar improvement this evening the single currency could make further gains against its rivals.
US Dollar
Federal Reserve policymakers are unlikely to have greeted news that the personal consumption expenditure core index had unexpectedly fallen back to 1.3% in August. Given that this is the Fed’s preferred measure of inflation the US Dollar trended lower in response to this weaker showing. Nonetheless, given the hawkish nature of recent Fed speeches the downside potential of the ‘Greenback’ was limited, given the still high odds of a third 2017 interest rate hike.
Tonight’s ISM manufacturing index could put greater pressure on USD exchange rates, with signs of economic weakness unlikely to help the case for imminent monetary tightening.
Canadian Dollar
The appeal of the ‘Loonie’ soured sharply on the back of softer Canadian gross domestic product data. As growth stagnated on the month in July this added weight to the more cautious outlook expressed by the Bank of Canada (BOC) in recent days. With the economy in a less robust state of health the Canadian Dollar was prompted to trend lower across the board.
Unless September’s manufacturing PMI surprises to the upside the Canadian Dollar is likely to remain on a bearish footing in the near term.
New Zealand Dollar
A sharp increase in building permits in August offered some measure of support to the ‘Kiwi’, pointing towards a stronger New Zealand housing market. The disappointing nature of the latest US data also boosted the New Zealand Dollar, seeming to reduce the likelihood of further Fed policy tightening before the end of the year.
In the absence of any fresh domestic data, though, NZD exchange rates are likely to return to a downtrend today, especially if worries over the domestic political landscape persist.
Data Released
October 2nd 08:30 AUD Manufacturing PMI (SEP)
October 2nd 10:00 AUD TD Securities Inflation (YoY) (SEP)
October 2nd 18:30 GBP Manufacturing PMI (SEP) 56.4
October 2nd 19:00 EUR Eurozone Unemployment Rate (AUG) 9.1%
October 2nd 23:30 CAD Manufacturing PMI (SEP) 54.9
October 3rd 00:00 USD ISM Manufacturing (SEP) 57.8