Australian Dollar Slides as US-China Trade Hopes Fade
Another sharp decline in building approvals on the year left AUD exchange rates trending lower yesterday as confidence in the outlook of the construction sector continued to deteriorate. The starts of the latest round of US-China trade talks failed to offer investors any particular cause for confidence, meanwhile. With the chances of an imminent breakthrough appearing slim the Australian Dollar faltered on bets that further tariffs could be in the pipeline.
If the second quarter consumer price index picks up in the second quarter as forecast, though, AUD exchange rates are likely to rally this morning.
Brexit Fears Keep Pound Under Pressure
Worries over Brexit continued to hang over the Pound overnight as Boris Johnson’s cabinet maintained a hard-line stance on the issue. With markets now pricing in much higher odds of a n-deal scenario support for GBP exchange rates proved limited. As no obvious compromise between the two sides exists, given Johnson’s dislike for the Irish backstop agreement, the risk of further losses remains.
Even so, a steady showing from the latest GfK consumer confidence index may encourage the Pound to recover some of its lost ground today.
Rising German Inflation Boosts Euro
German inflation bettered forecast in July, with the headline consumer price index picking up from 1.6% to 1.7% on the year. This defied expectations of a modest decline in inflationary pressure, giving the European Central Bank (ECB) some cause for confidence. Although other economic signals proved less encouraging, with the French growth rate easing, EUR exchange rates still found support on the back of the positive inflation data.
A similarly positive showing from the corresponding Eurozone consumer price index could help the single currency to make further gains this evening.
US Dollar Stumbles on Weaker Inflation Reading
Support for the US Dollar faltered last night after June’s personal consumption expenditure core reading failed to pick up as far as forecast. Investors were disappointed that the Federal Reserve’s preferred measure of inflation only clocked in at 1.6%, remaining short of the central bank’s target. This raised the odds of Fed policymakers taking a more dovish stance at their rate decision, eroding some of the strength of USD exchange rates.
As anticipation mounts for tonight’s rate announcement the appeal of the US Dollar looks set to ease.
Oil Price Uptick Fails to Support Canadian Dollar
A modest uptick in oil prices failed to offer the Canadian Dollar any particular boost yesterday, given lingering concerns over the global growth outlook. With trade tensions between the US and China appearing at risk of a fresh flare-up support for the commodity-correlated CAD proved generally limited. As another round of trade tariffs could stifle global economic activity the Canadian Dollar was left on the back foot.
Demand for the Canadian Dollar could diminish further this evening as forecasts point towards a slowdown in May’s gross domestic product data.
Falling Building Permits Weigh Down New Zealand Dollar
As building permits saw a surprise -3.9% decline on the month in June this raised fresh concerns over the outlook of the New Zealand economy. With the construction sector losing momentum the chances of a stronger second quarter gross domestic product appear muted. The general deterioration in market risk appetite also weighed on NZD exchange rates, meanwhile.
The New Zealand Dollar could shed further ground this morning if July’s ANZ business confidence index slides further into negative territory.
Data Releases
July 31st 09:01 GBP GfK Consumer Confidence Index (JUL) -13
July 31st 11:00 NZD ANZ Business Confidence (JUL) -34.9
July 31st 11:30 AUD Consumer Price Index (YoY) (2Q) 1.5%
July 31st 19:00 EUR Eurozone Consumer Price Index (YoY) (JUL) 1.1%
July 31st 22:30 CAD Gross Domestic Product (YoY) (MAY) 1.3%
August 1st 04:00 USD Federal Open Market Committee Rate Decision 2.25%