Dovish RBA Minutes Drive Australian Dollar Lower
Support for the Australian Dollar proved limited as the Reserve Bank of Australia’s (RBA) September meeting minutes showed an increased sense of reticence. The minutes indicated that policymakers remain open to the possibility of further interest rate cuts down the line, encouraging bets that a cut could come sooner rather than later. Coupled with a general increase in market risk aversion, fuelled by mounting Middle Eastern tensions, this left AUD exchange rates on the back foot.
Another underwhelming Westpac leading index reading could keep the Australian Dollar under pressure this morning.
Pound Softens in Anticipation of Supreme Court Judgement
Political jitters weighed on the Pound once again as the supreme court appeal over the prorogation of parliament got under way. The odds of the UK leaving the EU without a deal appeared to pick up further overnight thanks to the continued lack of progress towards a mutually agreeable deal. This left the Pound vulnerable to selling pressure as worries over the political and economic outlook of the UK persisted.
With forecasts pointing towards a dip in August’s consumer price index GBP exchange rates could shed further ground today.
Stronger Economic Sentiment Shores up Euro
Both the German and Eurozone ZEW economic sentiment indexes showed a solid improvement on the month in September. While the indexes remained firmly in negative territory the Euro still took encouragement from the sharp uptick, which suggests that businesses are taking a more optimistic outlook. Even though the accompanying German current conditions index was less positive in nature this was not enough to dent the single currency.
Comments from European Central Bank (ECB) policymakers may prompt EUR exchange rates to weaken, however, as markets look for further signs of dovishness.
US Dollar Trends Higher as Production Improves
The US economy demonstrated greater signs of resilience in August, with both industrial and manufacturing production showing an acceleration on month. This rebound in output suggests that the impact of the ongoing US-China trade dispute has been limited, encouraging hopes that a potential recession might no longer be on the cards. An unexpectedly solid improvement in the accompanying capacity utilisation reading also fuelled confidence in the health of the economic outlook.
As anticipation builds for tonight’s Federal Open Market Committee (FOMC) announcement the prospect of an interest rate cut looks set to limit the strength of USD exchange rates.
Manufacturing Sales Decline Weighs on Canadian Dollar
A disappointing manufacturing sales figure left the Canadian Dollar biased to the downside overnight. As sales contracted -1.3% on the month in July this raised fresh doubts over the resilience of the Canadian economy, putting a dampener on CAD exchange rates. Investors also piled out of the commodity-correlated Canadian Dollar as oil prices saw a sharp -6% drop on reports that the Saudi oil facility will be fully operational again sooner than anticipated.
Any softening in the consumer price index could fuel additional Canadian Dollar losses.
Dairy Price Strength Fails to Boost New Zealand Dollar
Even though the Global Dairy Trade auction saw a 2% increase in prices this was not enough to shore up the New Zealand Dollar. Given the recent run of underperformance from the dairy index markets saw little incentive to bet that the sector has turned around yet. With investors also spooked by increased tensions between the US and Iran support for NZD exchange rates proved limited.
The New Zealand Dollar looks set to shed further ground this morning as the second quarter current account gross domestic product ratio is expected to deliver another contraction.
Data Releases
September 18th 8:45 NZD Current Account Gross Domestic Product Ratio (YTD) (2Q) -3.3%
September 18th 10:30 AUD Westpac Leading Index (MoM) (AUG) 0.1%
September 18th 18:30 GBP Consumer Price Index (YoY) (AUG) 1.8%
September 18th 22:30 CAD Consumer Price Index (YoY) (AUG) 2.0%
September 19th 04:00 USD Federal Open Market Committee Rate Decision 2.0%