AUD Exchange Rates Supported before RBA Announcement
Australian Dollar (AUD) exchange rates advanced during the local session as China’s Caixin manufacturing PMI defied forecasts, climbing from 49.9 to 50.4.
While this was only a modest improvement, it did push the measure of manufacturing output above the 50 mark separating growth from contraction.
However, the ‘Aussie’ could shed gains today if the Reserve Bank of Australia (RBA) implies that another interest rate cut is on the cards.
Investors will also be looking ahead to Australia’s 2Q GDP report.
Political Chaos Threatens the Pound (GBP)
The Pound (GBP) got off to a poor start this week as investors grew increasingly skittish ahead of what looks to be a pivotal week in UK politics.
Adding to the pressure on Sterling yesterday was the publication of the UK’s manufacturing PMI, as domestic factory growth slumped to a seven-year low in August.
With parliament returning from summer recess during the European session, GBP exchange rates remain vulnerable to additional losses.
MPs are expected to try and push through legislation aimed at blocking a no-deal Brexit at the earliest opportunity, with observers speculating on the possibility this could lead to a snap election.
EUR Exchange Rates Pressured by ECB Speculation
While the single currency gained on the pound, EUR was unable to replicate this success in broader trade, with sentiment being undermined by mixed Eurozone PMIs. The patchy domestic data bolstered expectations of aggressive stimulus measures from the European Central Bank (ECB) this month.
The Euro may continue to struggle to hold its ground given the weak Eurozone growth outlook and ECB rate cut expectations.
Trade Optimism Extends Losses in GBP/USD Exchange Rate
The US dollar drifted higher during the European session despite US markets being closed for Labour Day. This upside in USD was helped by optimism regarding US-China trade relations, thanks to President Donald Trump’s commitment to hold high level talks in Washington this month.
The US Dollar could struggle to consolidate these gains however, with the ISM manufacturing PMI potentially exerting some downward pressure if US factory activity continued to slow in August.
CAD Strengthens before BOC Decision
The ‘Loonie’ broadly strengthened at the start of the week as investors looked ahead to the Bank of Canada’s (BoC) upcoming policy meeting.
BoC policymakers are expected to keep interest rates unchanged at 1.75% this month, but a surprisingly dovish tone could push CAD exchange rates lower.
However, before that we’ve got Canada’s manufacturing index to contend with. CAD could gain if output in the manufacturing sector increased.
NZD Exchange Rates Could Fall if Dairy Prices Weaken
New Zealand Dollar (NZD) exchange rates also benefited from China’s comparatively upbeat manufacturing report.
NZD was able to shake off the impact of New Zealand’s terms of trade index for the second quarter, which fell -2.6%.
However, the ‘Kiwi’ could slide today if the latest dairy auction reveals a decline in the price of New Zealand’s most lucrative commodity.
Data Releases
14:30 RBA Rate Decision
18:30 GBP Markit Construction PMI
23:30 CAD RBC Canadian Manufacturing PMI