Fresh Chinese Tariffs Dent Australian Dollar
As China unveiled plans to impose additional tariffs on US goods worth $75 billion the mood towards the risk-sensitive Australian Dollar soured. This latest escalation in the long-running US-China trade spat exacerbated market worries over the health of the global outlook. With Federal Reserve policymakers pushing for a less hawkish policy approach support for AUD exchange rates proved limited heading into the weekend.
Unless markets find cause for confidence today the Australian Dollar looks set to remain on the back foot against its rivals.
Criticism of Withdrawal Agreement Drags on Pound
Thursday’s bout of Brexit optimism ultimately proved short-lived as Brexiteers continued to criticise the proposed withdrawal agreement. As a collection of Conservative MPs indicated that the Irish backstop is only one part of the agreement they object to the chances of an imminent breakthrough faded. With a resolution to the Irish border issue likely to prove elusive in the days ahead GBP exchange rates were left to trend lower once again.
As an air of political uncertainty persists the potential for Pound appears limited.
Italian Coalition Scramble Limits Euro Demand
The scramble to solve the Italian political crisis continued, with President Sergio Mattarella giving parties four more days to set up a new coalition government. However, as Mattarella cautioned that any coalition must command a solid majority the prospect of an election remains on the table. This all limited the appeal of the Euro, limiting its potential during trade on Friday.
Another monthly decline in the German IFO business climate index could see EUR exchange rates shedding further ground.
US Dollar Softens as Political Pressure on Fed Intensifies
A sharp monthly decline in new home sales did little to support the US Dollar, signalling continued weakness within the housing market. USD exchange rates failed to benefit from Federal Reserve Chair Jerome Powell’s appearance at the Jackson Hole Symposium, meanwhile. Although Powell proved less dovish in tone than the White House would like this was not enough to assuage speculation that another interest rate cut could be on the way.
As long as durable goods orders show solid growth in July, though, this may offer the US Dollar a rallying point tonight.
Canadian Dollar Falters in spite of Retail Sales Resilience
CAD exchange rates returned to a downtrend in spite of retail sales bettering expectations in June. Although the figure avoided a fresh contraction, instead holding steady on the month, this failed to encourage any fresh demand for the Canadian Dollar. As global trade tensions saw fresh escalation the appeal of the risk-sensitive CAD naturally diminished.
Without the support of wider market risk appetite the Canadian Dollar may struggle to recover any particular ground today.
Muted Retail Sales Weigh on New Zealand Dollar
The second quarter retail sales data proved disappointing, with sales excluding inflation only showing growth of 0.2%. This weaker showing left investors with little reason to favour the New Zealand Dollar, adding to worries over the economic outlook. NZD exchange rates also came under pressure thanks to a deterioration in wider market confidence.
Even so, if July’s set of trade figures show an improvement this could encourage the New Zealand Dollar to trend higher across the board.
Data Releases
August 26th 08:45 NZD Trade Balance (JUL)
August 26th 18:00 EUR German IFO Business Climate Index (AUG) 95.2
August 26th 22:30 USD Durable Goods Orders (JUL) 1.0%