Australian Dollar Trends Lower as Odds of Dovish RBA Rise
The mood towards the Australian Dollar remained generally muted yesterday as markets saw an increasing likelihood of the Reserve Bank of Australia (RBA) cutting interest rates again before the end of the year. With the Federal Reserve continuing its shift into dovishness the RBA looks set to come under increased pressure to follow suit in order to prevent AUD exchange rates rising sharply. With market risk appetite still proving limited there was little incentive to buy into the Australian Dollar at this stage.
AUD exchange rates could extend their losses further this morning if June’s building approvals data shows another sharp contraction on the year.
Increasing Risk of No-Deal Brexit Drags Down Pound
Demand for the Pound failed to recover at the start of the week as investors reacted to the latest comments from the new UK cabinet. The suggestion that a no-deal Brexit is now considered the most likely scenario saw GBP exchange rates plunge to fresh multi-month lows overnight. With markets bracing for the possibility of the UK crashing out of the EU without a deal in October the appeal of the Pound naturally soured.
Without the support of fresh UK data today GBP exchange rates look set to remain on the back foot in the face of ongoing Brexit-based anxiety.
Euro Under Pressure as ECB Set to Ease
Support for the Euro proved muted during Monday’s European session thanks to an absence of fresh Eurozone data. With the European Central Bank (ECB) appearing on course to cut interest rates in the near future investors saw little cause for confidence in the single currency. Even though market risk appetite eased this was not enough to offer EUR exchange rates any particular boost at this stage.
Any easing in July’s German consumer price index could expose the Euro to additional selling pressure, with weaker inflation likely to encourage ECB dovishness.
US Dollar Stumbles on Disappointing Manufacturing Index
As the Dallas Fed manufacturing index fell short of forecast in July this helped to limit the bullish momentum of the US Dollar overnight. USD exchange rates faltered as the manufacturing index clocked in at -6.3 rather than -5.0, even though this still represented an improvement on the previous month’s reading. With the US manufacturing sector still showing signs of a slowdown the US Dollar struggled to gain any fresh ground against its rivals.
However, an uptick in June’s US personal consumption expenditure core reading may encourage USD exchange rates to push higher once again.
Weakening Oil Prices Fail to Drag Down Canadian Dollar
CAD exchange rates made some modest gains last night even as global oil prices proved disappointing. Brent crude struggled to make any particular move overnight thanks to lingering anxiety over the global growth outlook and signs of an easing in Middle Eastern tensions. Nevertheless, the Canadian Dollar benefitted from the relative softening of the US Dollar as the odds of an imminent Fed interest rate cut continued to grow.
If oil prices remain under pressure today this could see the Canadian Dollar fall further out of favour, though.
Risk Aversion Limits New Zealand Dollar Support
With markets in a generally risk-off mood the New Zealand Dollar proved lacking in tension on Monday. NZD exchange rates remained biased to the downside thanks to an absence of supportive domestic data and increasing concern over the strength of the global growth outlook.
Unless June’s building permits data shows another solid increase on the month the New Zealand Dollar looks set to remain under pressure over the course of the day.
Data Releases
July 30th 08:45 NZD Building Permits (MoM) (JUN) 0.4%
July 30th 11:30 AUD Building Approvals (YoY) (JUN) -24.3%
July 30th 22:00 EUR German Consumer Price Index (YoY) (JUL) 1.5%
July 30th 22:30 USD Personal Consumption Expenditure Core (YoY) (JUN) 1.7%