Labour Market Strength Lifts Australian Dollar
July’s employment change figure bettered expectations, surging 41,100 on the month as the participation rate picked up. Although this was not enough to bring down the unemployment rate investors still greeted this sign of a tightening labour market. This helped to boost the Australian Dollar against its rivals, given the Reserve Bank of Australia’s (RBA) previous concern over domestic employment.
However, if trade tensions between the US and China continue to escalate this could push AUD exchange rates into a fresh downtrend.
Pound Picks up as UK Retail Sales Avoid Contraction
Confidence in the underlying health of the UK economy improved on the back of the latest retail sales data. As sales defied forecasts of a monthly contraction, instead strengthening 0.2%, the mood towards the Pound picked up. With consumers appearing resilient even in the face of ongoing political uncertainty GBP exchange rates were left to trend higher across the board.
If MPs continue to push back against Boris Johnson’s hard-line Brexit strategy the Pound may see additional volatility in the days ahead.
German Recession Worries Keep Euro Under Pressure
Demand for the Euro remained muted on Thursday as worries over the Eurozone’s economic outlook persisted. Without the release of any fresh domestic data investors were left to dwell on the underwhelming nature of the recent German growth data. As markets continue to bet on the prospect of an imminent German recession the single currency struggled to find any support.
A narrowed Eurozone trade surplus may put additional weight on the Euro as confidence in the global trade outlook remains negative.
Strong Retail Sales Fail to Shore up US Dollar
While advance retail sales saw a surprise improvement on the month this was not enough to shore up the US Dollar overnight. Although the 0.7% growth points towards a higher level of consumer spending at the start of the third quarter investors were more concerned by the latest US production data. As both manufacturing and industrial production saw a decline on the month this kept USD exchange rates on a weaker footing.
With August’s University of Michigan consumer sentiment index forecast to decline the US Dollar could lose fresh ground tonight.
Signs of Housing Market Strength Offer Limited Canadian Dollar Boost
Canadian existing home sales saw a sharp rally in July, surging 3.5% on the month. This solid increase suggests that the housing market saw something of a recovery at the start of the third quarter, easing worries over the economic outlook. A strong showing from the ADP payroll estimate added to the positive picture, although CAD exchange rates struggled to capitalise on this in the face of market risk aversion.
As long as market sentiment continues to deteriorate the Canadian Dollar is likely to fall further out of favour.
New Zealand Dollar Softens as Market Sentiment Sours
The latest escalation in the US-China trade dispute saw the New Zealand Dollar come under fresh pressure. With earlier hopes of progress towards another round of talks dashed the risk-sensitive NZD was left to trend lower across the board. As the US approach appeared at risk of hardening once again demand shifted in favour of safe-haven assets, leaving NZD exchange rates biased to the downside.
An uptick in the manufacturing PMI, however, could help the New Zealand Dollar to strengthen today.
Data Releases
August 16th 08:30 NZD Manufacturing PMI (JUL) 51.8
August 16th 19:00 EUR Eurozone Trade Balance (JUN) 18.6 billion
August 17th 00:00 USD University of Michigan Consumer Sentiment Index (AUG) 97.2