Risk Aversion Limits Australian Dollar Support
Demand for the Australian Dollar proved muted ahead of the weekend thanks to a lack of fresh domestic data. Investors saw little incentive to favour the antipodean currency as worries over the global growth outlook and the US-China trade dispute remain. With market risk appetite still generally limited by the prospect of further US trade tariffs AUD exchange rates struggled to find any upside momentum.
If relations between the US and China show fresh signs of souring this could see the Australian Dollar fall further out of favour.
Push for No Confidence Vote Encourages Pound Boost
GBP exchange rates staged a solid recovery during Friday’s trading session, capitalising on the latest political developments in the UK. Even though Parliament remains on its summer recess MPs continued to engage in talks aiming to prevent the UK crashing out of the EU at the end of October. With Labour still pushing for a no confidence vote in Boris Johnson investors were encouraged to buy back into the weakened Pound.
However, unless opposition parties and Conservative rebels can reach an agreement the looming risk of a no-deal Brexit may keep GBP exchange rates under pressure.
Promise of Significant ECB Easing Pushes Down Euro
The Euro crumbled in response to comments from Bank of Finland Governor Olli Rehn, who suggested that ‘significant’ monetary loosening is imminent. With the European Central Bank (ECB) looking set to deliver a large package of stimulus at its September policy meeting the appeal of the single currency diminished. Coupled with anxiety over the possibility of a German recession this left EUR exchange rates on the back foot.
With no change expected from the finalised Eurozone consumer price index the Euro may struggle to find any rallying point today.
Consumer Confidence Slump Drags on US Dollar
Confidence in the outlook of the US economy took a fresh blow as August’s University of Michigan consumer sentiment index fell short of forecasts. While markets had expected to see the index ease to 97.0 it instead clocked in at 92.1. This sharp deterioration suggests that ongoing trade tensions with China are having a detrimental impact on the domestic economy, adding to worries surrounding the current slowdown in economic growth.
Any further weakening of market risk appetite could help the US Dollar to recover some of its lost traction, though.
Muted Oil Market Limits Canadian Dollar Potential
Worries surrounding the health of the global economy continued to weigh on the Canadian Dollar, keeping the risk-sensitive currency under pressure. Conflicting US and OPEC messages on oil also limited demand for the Canadian Dollar as oil prices faltered. With the outlook for the oil market appearing largely bearish there was little to support CAD exchange rates at this stage.
Unless oil prices move higher in the near term the appeal of the Canadian Dollar may remain muted.
Manufacturing Contraction Dents New Zealand Dollar
A sharp decline in July’s manufacturing PMI pushed the New Zealand Dollar down against its rivals last week. As the index dropped from 51.1 to 48.2 this signalled a contraction in the manufacturing sector, casting fresh doubt over the strength of the domestic outlook. With the Reserve Bank of New Zealand (RBNZ) already looking biased towards further monetary loosening this weak reading saw NZD exchange rates trending lower.
If the corresponding services PMI picks up on the month, however, this could help the New Zealand Dollar to recover some of its lost ground.
Data Releases
August 19th 08:30 NZD Services PMI (JUL) 53
August 19th 19:00 EUR Eurozone Consumer Price Index (YoY) (JUL F) 1.1%