Stronger Demand for Loans Boosts Australian Dollar
A surge in home loans and investment lending offered the Australian Dollar a boost at the start of the week. This sharp increase in borrowing suggests that households are taking a more optimistic view in the third quarter, potentially shoring up economic growth in the months ahead. However, the upside potential of AUD exchange rates was somewhat limited thanks to the underwhelming nature of August’s Chinese trade data.
If the NAB business confidence index shows a continued deterioration in sentiment this could put greater pressure on the Australian Dollar.
Pound Rallies as UK Growth Sees Surprise Improvement
As a better-than-expected UK gross domestic product report caught investors off-guard the Pound was encouraged to rally to fresh multi-week highs. A monthly growth rate of 0.3% in July suggests that a technical recession may not be on the cards after all, to the relief of markets. Although it remains to be seen whether the economy can maintain this renewed momentum throughout the rest of the quarter this was enough to lift GBP exchange rates across the board.
This evening’s average weekly earnings data may offer the Pound an additional boost if it points towards a fresh uptick in UK wage growth.
Widened German Trade Surplus Benefits Euro
The Euro found some support against its rivals as July’s German trade data bettered forecasts, showing a surprise widening of the surplus. An unexpected 0.7% increase in export volumes on the month helped to swell the surplus to 21.4 billion, easing worries over the outlook of the Eurozone’s powerhouse economy. This strong showing suggests that Germany has started to shake off the global trade slowdown, offering EUR exchange rates a boost.
Without the support of fresh Eurozone data, though, the single currency looks vulnerable to renewed selling pressure today.
Risk Appetite Limits US Dollar Appeal
Although Chinese trade data proved underwhelming this was not enough to offer the US Dollar a leg up overnight. As market risk appetite persisted this left the safe-haven US Dollar with little in the way of support, with markets instead favouring higher-yielding assets. With confidence in the underlying health of the US economy still muted USD exchange rates struggled to find any particular traction.
A decline in August’s NFIB small business optimism index could drive further US Dollar losses tonight.
Oil Price Jump Lifts Canadian Dollar
CAD exchange rates continued to gain ground as the oil market strengthened sharply, with Brent crude rising 1.4% on the day’s opening levels. As markets see an increasing likelihood of the Bank of Canada (BOC) keeping interest rates on hold for the remainder of the year the appeal of the Canadian Dollar improved. With other central banks around the world still on an easing bias this gave investors greater reason to favour the Canadian Dollar.
With building permits forecast to show a sharp rebound on the month in July CAD exchange rates may remain on a positive footing.
New Zealand Dollar Slumps amid Manufacturing Slowdown
The New Zealand economy continued to offer markets cause for concern yesterday as the second quarter manufacturing activity index contracted -0.7%. This decline suggests that the sector lost fresh momentum in the second quarter, raising the risk of a slide into a wide-scale economic contraction. Even as market risk appetite improved this failed to shore up the New Zealand Dollar.
Any weakness from the ANZ truckometer, which measures economic activity, may add to the bearish mood of NZD exchange rates.
Data Releases
September 10th 08:45 NZD Retail Card Spending (MoM) (AUG) 0.5%
September 10th 11:30 AUD NAB Business Confidence (AUG) 3
September 10th 16:00 GBP Average Weekly Earnings (3M/YoY) (JUL) 3.7%
September 10th 20:00 USD NFIB Small Business Optimism (AUG) 103.5
September 10th 22:30 CAD Building Permits (MoM) (JUL) 1.5%