Rising Odds of RBA Action Drag on Australian Dollar
With markets seeing an increasing risk of Reserve Bank of Australia (RBA) action in the wake of recent underwhelming data the mood towards the Australian Dollar remained muted. However, as investors also moved to price in higher odds of further Federal Reserve interest rate cuts the downside potential of AUD exchange rates proved limited ahead of the weekend.
If the CBA services PMI slides further into a state of contraction this morning the Australian Dollar could face a fresh bout of selling pressure.
Rising Tensions Over Brexit Weigh on Pound
Comments from European Commission President Jean-Claude Juncker helped to shore up the Pound, as he expressed optimism that a Brexit deal can still be reached in the near future. This positivity ultimately proved short-lived, however, as tensions between the two sides flared up once again. With Downing Street requesting that EU negotiators do not disclose the details of its latest proposals to representatives of the other 27 member states hopes of progress quickly floundered.
As September’s CBI industrial trends orders index is expected to show a sharp decline this could add to GBP exchange rate weakness today.
Lacklustre German Producer Prices Dent Euro
August’s German producer price index figures fell short of forecast on Friday, leaving the Euro biased to the downside. As the monthly price index showed a -0.5% contraction this raised concerns that inflationary pressure within the Eurozone’s powerhouse economy is failing to pick up. Even though September’s Eurozone consumer confidence index showed a modest improvement this failed to encourage any EUR exchange rate rally.
As long as the German manufacturing PMI continues to point towards a slowdown support for the Euro is likely to remain limited.
US Dollar Weakens as Markets Price in Rate Cut Odds
Markets continued to price in higher odds of further Federal Reserve monetary loosening ahead of the weekend, denting the strength of the US Dollar. News that the central bank was forced to stabilise the US money market for a fourth consecutive day, injecting billions into the system, also weighed on USD exchange rates. As confidence in the underlying health of the US economy continued to deteriorate investors lacked incentive to support the US Dollar.
Any weakening of the Chicago Fed national activity index could drive further losses for USD exchange rates tonight.
Modest Retail Sales Growth Boosts Canadian Dollar
While retail sales failed to strengthen as far as forecast on Friday this still kept the Canadian Dollar on a positive footing. The 0.4% uptick still represented a solid improvement on the month, however, helping to keep CAD exchange rates steady. As oil prices maintained a positive trend this also offered support to the commodity-correlated Canadian Dollar.
Even so, a slowdown in July’s wholesale trade sales could see CAD exchange rates come under renewed pressure overnight.
Lack of Confidence Leaves New Zealand Dollar Muted
Demand for the New Zealand Dollar proved relatively soft in the wake of the week’s raft of domestic data. With confidence in the outlook of the New Zealand economy still looking rather limited markets saw little reason to favour the New Zealand Dollar against its rivals. As the odds of Reserve Bank of New Zealand (RBNZ) policy action remain high this also put a dampener on NZD exchange rates.
Without the support of fresh domestic data today the New Zealand Dollar may struggle to return to a positive footing.
Data Releases
September 23rd 09:00 AUD CBA Services PMI (SEP) 45.3
September 23rd 17:30 EUR Germany Manufacturing PMI (SEP) 44.4
September 23rd 20:00 GBP CBI Industrial Trends Orders (SEP) -23
September 23rd 22:30 CAD Wholesale Trade Sales (MoM) (JUL) 0.3%
September 23rd 22:30 USD Chicago Fed National Activity Index (AUG) -0.35