Rising Unemployment Drags on Australian Dollar
Although forecasts had pointed towards August’s unemployment rate picking up from 5.2% to 5.3% this failed to prevent the Australian Dollar trending lower. An accompanying decline in full-time employment added to the bearish mood of AUD exchange rates, suggesting that the underlying health of the labour market is deteriorating. On the back of the Reserve Bank of Australia’s (RBA) recent dovish signal this prompted investors to sell out of the Australian Dollar.
In the absence of any improvement in market risk appetite AUD exchange rates look set to remain on the back foot today.
Steady BoE Policy Fails to Foster Pound Gains
The Bank of England’s (BoE) decision to leave interest rates on hold did little to alter the mood towards the Pound overnight. However, as policymakers adopted a generally cautious tone on the growth outlook this kept GBP exchange rates under pressure. As markets see greater odds of a future interest rate cut, as opposed to a hike, the upside potential of the Pound proved limited.
As the uncertainty surrounding the issue of Brexit lingers GBP exchange rates may struggle to find any particular support in the near future.
Current Account Surplus Boosts Euro
A sharper-than-expected widening of the Eurozone current account surplus offered a boost to EUR exchange rates. As the surplus swelled to 29.8 billion this encouraged a greater sense of confidence in the economic outlook, in spite of the European Central Bank’s (ECB) recent warnings. Even so, the Euro only gained limited ground as banks gave the ECB’s new cheap loans a cold reception, getting the new quantitative easing programme off to a weak start.
An improvement in September’s Eurozone consumer confidence index may offer the single currency a fresh boost ahead of the weekend, though.
US Dollar Struggles for Traction over Uncertain Fed Outlook
The US Dollar saw muted demand in the wake of the Federal Open Market Committee’s (FOMC) decision to cut interest rates by 25bpt. As sentiment among policymakers proved decidedly mixed in nature investors saw little clarity over the future direction of interest rates. As a result, USD exchange rates struggled to gain additional ground during trade on Thursday. A better-than-expected Philadelphia Fed manufacturing index failed to offer the US Dollar any additional support.
Fresh commentary from Fed policymakers could help to drive the US Dollar lower across the board tonight.
Mixed Employment Data Limits Canadian Dollar Uptrend
While the ADP employment change report showed a stronger increase than anticipated in August this was accompanied by a downward revision to July’s reading. All in all, this left investors with little confidence in the health of the Canadian labour market. However, CAD exchange rates still found support thanks to a fresh spike in oil prices. As Saudi Arabia requested 20 million oil barrels from Iraq markets found reason to doubt claims that production will return to normal levels by the end of the month.
As investors expect to see a solid uptick in July’s retail sales data, though, the Canadian Dollar may recover further.
New Zealand Dollar Slumps on Slowing Growth
Confidence in the health of the New Zealand economy deteriorated yesterday even after the second quarter gross domestic product saw a smaller slowdown than forecast. While the growth rate bettered expectations it still points towards a sustained loss of momentum, weighing heavily on NZD exchange rates. With the Organisation for Economic Co-operation and Development (OECD) lowering its 2020 growth forecasts investors saw little reason to favour the New Zealand Dollar.
Unless credit card spending shows signs of picking up in August NZD exchange rates look set to shed further ground today.
Data Releases
September 20th 13:00 NZD Credit Card Spending (YoY) (AUG)
September 20th 22:30 CAD Retail Sales (MoM) (JUL) 0.6%
September 21st 00:00 EUR Eurozone Consumer Confidence (SEP) -7.0