Australian Dollar Struggles Ahead of RBA Minutes
The Australian Dollar struggled to find any particular direction in the absence of any fresh domestic data. Persistent market anxiety over the global trade outlook continued to limit support for AUD exchange rates, even though their downside potential proved minimal at this stage. As anticipation for the release of August’s Reserve Bank of Australia (RBA) meeting minutes investors were left with little reason to buy into the Australian Dollar.
If RBA policymakers show greater signs of dovishness in the meeting minutes this could see AUD exchange rates trending sharply lower.
Weakening Household Finances Drive Pound Down
Confidence in the Pound faded once again as Markit’s UK household finance index fell to a three-month low. With households showing increasing concern over their economic prospects in the face of ongoing Brexit-based anxiety spending looks set to diminish in the months ahead. Political anxiety continued to mount, meanwhile, as the government refused to recall Parliament from its summer recess.
August’s CBI industrial trends orders index is unlikely to offer the Pound any particular rallying point, with the figure forecast to remain deep within negative territory.
Euro Shrugs Off Eurozone Inflation Downgrade
July’s finalised Eurozone consumer price index saw a surprise downward revision from 1.1% to 1.0%. Although this pushed the headline inflation rate further away from the European Central Bank’s (ECB) 2% target, however, the Euro remained on a positive footing. As markets had already effectively priced in the impact of an imminent ECB interest rate cut and the possible return of its quantitative easing programme EUR exchange rates lacked the downside potential for further losses.
Even so, if Eurozone construction output falters this could dent the appeal of the Euro today.
Easing Recession Fears Limit US Dollar Downside
As market fears over the possibility of a future US recession eased this helped the US Dollar to remain on a generally positive footing. The Trump administration’s assurances that trade discussions with China are still open gave investors hope that further economic disruption may be avoided in the months ahead. Increasing confidence that the Federal Reserve will imminently cut interest rates also put a floor under USD exchange rates.
Mounting anticipation ahead of the release of the Federal Open Market Committee’s (FOMC) latest set of meeting minutes could see the US Dollar shedding ground over the course of the day.
Canadian Dollar Fails to Benefit from Oil Price Recovery
Oil prices staged a solid rebound at the start of the week as a drone attack on a Saudi oil field stoked fresh concerns over tensions in the Middle East. The prospect of fresh supply disruption helped to lift Brent crude above US$59 per barrel. However, the Canadian Dollar failed to capitalise on this improvement thanks to the general deterioration in market risk appetite.
Tonight’s manufacturing sales index may put additional pressure on CAD exchange rates as forecasts point towards a sharp monthly contraction.
Resilient Services PMI Supports New Zealand Dollar
NZD exchange rates found some support yesterday as July’s services PMI strengthened from 53.0 to 54.7. This improvement helped to counterbalance the negative impact of last week’s manufacturing PMI contraction, boosting confidence in the economic outlook. A rebound in the second quarter producer price index similarly helped to limit New Zealand Dollar selling, even though the risk of further Reserve Bank of New Zealand (RBNZ) dovishness remains.
Any easing in prices at the latest Global Dairy Trade auction could put a dampener on the New Zealand Dollar, however.
Data Releases
August 20th 11:30 AUD Reserve Bank of Australia Meeting Minutes (AUG)
August 20th 19:00 EUR Eurozone Construction Output (YoY) (JUN) 1.8%
August 20th 20:00 GBP CBI Industrial Trends Orders (AUG) -25
August 20th 22:30 CAD Manufacturing Sales (MoM) (JUN) -1.8%