Australian Dollar Stumbles on Business Confidence Decline
AUD exchange rates were knocked off their positive footing yesterday as the NAB business confidence index continued to deteriorate, falling from 4 to just 1 in August. This latest decline in business sentiment suggests that economic activity is likely to remain limited in the months ahead, diminishing the potential for domestic growth. With market risk appetite already weakening the Australian Dollar was left to trend lower in the wake of the data.
A similarly disappointing showing from the Westpac consumer confidence index may add to the bearish mood of AUD exchange rates this morning.
Solid Wage Data Shores up Pound
July’s UK average weekly earnings data bettered forecasts, offering the Pound a fresh boost overnight. As earnings growth accelerated to 4.0% on the year this encouraged GBP exchange rates to trend higher across the board, benefitting from hopes of stronger consumer spending to come. Even so, the report was not completely positive as the job creation showed signs of slowing in the face of ongoing economic uncertainty.
With parliament prorogued for the next five weeks a sense of political anxiety could also weigh on GBP exchange rates in the days ahead.
Euro Stumbles as Anxiety over ECB Outlook Increases
Demand for the Euro remained limited as the latest set of Chinese inflation data raised anxiety over the global inflation outlook. As China’s producer price index continues to fall this is likely to weigh on prices around the world, dampening inflationary pressure. With the Eurozone already struggling to stimulate stronger price pressures the risk of greater European Central Bank (ECB) monetary loosening naturally rose.
As expectations mount for the September policy meeting this looks set to keep EUR exchange rates on the back foot.
Weak Small Business Optimism Fails to Weigh Down US Dollar
Although August’s NFIB small business optimism index fell short of forecast this failed to prevent a USD exchange rate rally last night. The general deterioration in market sentiment helped to fuel US Dollar gains, with investors flocking back into safe-haven assets. Even though investors still see high odds of further Federal Reserve monetary loosening this was not enough to limit the appeal of the US Dollar for now.
If the US producer price index weakens in August this could see USD exchange rates come under pressure, with weaker inflation set to increase the pressure on the Fed.
Solid Construction Data Boosts Canadian Dollar
The Canadian Dollar continued to push higher across the board as July’s building permits data proved stronger than anticipated. As permits increased 3% on the month this almost completely reversed June’s decline, suggesting a recovery within the construction sector. Coupled with an uptick in the latest housing starts figure this gave CAD exchange rates a fresh boost of momentum.
An increased second quarter capacity utilisation rate may encourage further gains for the Canadian Dollar tonight.
Weakening Economic Activity Drags Down New Zealand Dollar
August’s ANZ truckometer offered investors fresh cause for concern, showing a -4.2% decline on the month. This latest sign of weakening economic activity drove NZD exchange rates down, especially as the wider sense of market risk appetite faded. With the economy struggling to show solid signs of growth the odds of further Reserve Bank of New Zealand (RBNZ) interest rate cuts increased.
Unless market sentiment improves markedly today the appeal of the New Zealand Dollar is unlikely to increase.
Data Releases
September 11th 10:30 AUD Westpac Consumer Confidence (SEP) -2%
September 11th 22:30 CAD Capacity Utilisation Rate (2Q) 81.8%
September 11th 22:30 USD Producer Price Index (YoY) (AUG) 1.7%