Australian Dollar Strengthens as Trade Data Betters Forecast
A smaller-than-expected narrowing of July’s trade surplus helped to buoy the Australian Dollar, suggesting that trade conditions have not deteriorated as sharply as anticipated. As US and Chinese officials agreed to meet for fresh trade talks in October the mood towards the risk-sensitive ‘Aussie’ improved further. While investors remain wary of the prospect of a renewed souring in relations between the US and China this was not enough to keep AUD exchange rates from making solid gains.
If the construction PMI remains firmly in a state of contraction, though, this could limit the potential for further Australian Dollar gains today.
Lower Odds of No-Deal Brexit Shore up Pound
Demand for the Pound remained solid overnight as MPs backed legislation aiming to rule out a no-deal Brexit scenario. As parliament also failed to offer support to Boris Johnson’s call for a snap general election investors were encouraged to adopt a more optimistic outlook. While political turmoil looks set to persist for some time to come, in spite of the diminished odds of an imminent election, GBP exchange rates made solid gains across the board.
An uptick in the Halifax house price index could give the Pound an additional boost ahead of the weekend.
Drop in German Factory Orders Drives Euro Weakness
Confidence in the outlook of the German economy continued to deteriorate as July’s factory orders figures fell short of forecast. News that orders had slumped -5.6% on the year raised fresh concerns over the health of the Eurozone’s powerhouse economy, increasing the potential for a third quarter recession. As the latest German construction PMI also demonstrated a further deterioration this left the single currency lacking in support on Thursday.
However, if July’s German industrial production data shows a rebound on the month the mood towards the Euro may pick up.
Solid Non-Manufacturing Index Limits US Dollar Downside
USD exchange rates found some support as August’s ISM non-manufacturing index unexpectedly picked up from 53.7 to 56.4, signalling robust service sector growth. This positive showing helped to ease market concerns over the economic outlook, in spite of recent signs of manufacturing weakness. A strong increase in the ADP employment change figure also gave the US Dollar a solid footing, even in the face of increased market risk appetite.
If August’s non-farm payrolls report also points towards a tightening US labour market this could help the US Dollar to gain ground tonight.
Canadian Dollar Fails to Maintain Momentum
After strengthening sharply in the wake of the Bank of Canada’s (BOC) decision the Canadian Dollar struggled to sustain its positive momentum. In the absence of fresh supportive data CAD exchange rates were left exposed to market selling pressure, even as the general sense of risk appetite improved. Rising oil prices were not enough to prevent the Canadian Dollar ceding back some of the previous day’s gains.
August’s net change in employment report could help to lift CAD exchange rates once again, though, if the figure improves as forecast.
Market Trade Optimism Benefits New Zealand Dollar
The latest bout of market optimism over US-China trade encouraged the New Zealand Dollar to pick up. As investors piled back into higher-yielding assets NZD exchange rates naturally benefitted, even as worries over the underlying health of the New Zealand economy persist.
A solid showing from tonight’s US jobs report could weigh heavily on the New Zealand Dollar, though, as the US Dollar strengthens.
Data Releases
September 6th 08:30 AUD Construction PMI (AUG) 40
September 6th 16:00 EUR German Industrial Production (MoM) (JUL) 0.3%
September 6th 17:30 GBP Halifax House Price Index (MoM) (AUG) 0.2%
September 6th 22:30 CAD Net Change in Employment (AUG) 20,000
September 6th 22:30 USD Change in Non-Farm Payrolls (AUG) 3.7%