Chinese Goodwill Tariff Gesture Lifts Australian Dollar
The announcement that China is adding soybeans and pork to its list of goods exempted from recent tariffs encouraged a fresh bout of market optimism. This latest goodwill move bolstered hopes that trade tensions between the US and China could continue to ease ahead of next month’s trade talks. AUD exchange rates gained fresh ground on the back of the move, also benefitting from the relative weakness of the US Dollar.
Any deterioration in market risk appetite, however, could see the Australian Dollar fall back out of favour today.
Pound Jumps as Market Optimism over Brexit Picks up
Speculation that the UK will avoid crashing out of the EU at the end of October helped to boost the Pound to fresh monthly highs ahead of the weekend. With cabinet members reportedly pushing Boris Johnson to request an extension of the Brexit deadline the appeal of the Pound improved. Although a significant degree of political uncertainty continues to hang over the UK outlook this was still enough to give GBP exchange rates a solid boost.
The latest political developments could easily knock the Pound off its bullish run, though.
Stronger Eurozone Trade Shores up Euro
An unexpected widening of the Eurozone trade surplus supported the Euro during trade on Friday. As the surplus widened from 17.9 billion to 19.0 billion this encouraged bets that the Eurozone economy may prove more resilient to recent trade anxiety. With a number of European Central Bank (ECB) policymakers expressing dissatisfaction with the decision to loosen monetary policy the outlook of the single currency naturally improved.
Ahead of tomorrow’s ZEW economic sentiment surveys the mood towards the Euro could sour, with markets wary of another monthly decline in confidence.
Improved Consumer Sentiment Fails to Shore up US Dollar
While both the University of Michigan consumer sentiment index and August’s advance retail sales figures bettered forecast this failed to boost the US Dollar. Even though signs point towards a greater degree of resilience within the US economy the general sense of market risk appetite weighed on USD exchange rates. With US-China trade tensions showing fresh signs of easing investors lacked any particular incentive to favour the safe-haven asset.
A deterioration in the Empire manufacturing index may add to the weakness of USD exchange rates tonight.
Oil Price Decline Drags Down Canadian Dollar
Oil markets reversed their positive trajectory on Friday as Brent crude slumped to US$60 per barrel. This decline was fuelled by the latest report from OPEC, which signalled that the global oil surplus is expected to remain in 2020. With global demand expected to weaken further in the coming year demand for oil dropped sharply, dragging the Canadian Dollar down across the board.
Fresh evidence of a slowdown within the Canadian housing market could encourage further losses for the Canadian Dollar in the near term.
New Zealand Dollar Slides on Continued Manufacturing Weakness
As the manufacturing PMI remained in a state of contraction the New Zealand Dollar shed further ground. Investors are still concerned by the relative weakness of the economic outlook, even as global trade tensions showed signs of easing. This left NZD exchange rates biased to the downside as markets remain wary of future Reserve Bank of New Zealand (RBNZ) monetary action.
A more positive showing from August’s services PMI, though, may offer the New Zealand Dollar a rallying point.
Data Releases
September 16th 08:30 NZD Services PMI (AUG) 53.8
September 16th 22:30 USD Empire Manufacturing Index (SEP) 4.0
September 16th 23:00 CAD Existing Home Sales (MoM) (AUG) 0.2%