Australian Dollar Slides as RBA Signals Intent to Cut Interest Rates
Support for the Australian Dollar diminished in the wake of the latest commentary from Reserve Bank of Australia (RBA) Governor Philip Lowe. As Lowe gave fresh indication of the central bank’s willingness to cut interest rates markets were inclined to price in higher odds of an imminent move. With rates looking set to fall at next week’s policy meeting AUD exchange rates were left on the back foot.
Without the release of fresh domestic data today the Australian Dollar is likely to remain biased to the downside.
Supreme Court Ruling Bolsters Pound
GBP exchange rates gained a fresh boost after the supreme court ruled that the prorogation of parliament was unlawful. With MPs set to return to business on Wednesday investors were encouraged to buy back into the Pound, even though the prospect of further political disruption remains. Hopes that the resumption of parliamentary business could increase the odds of a Brexit deal being agreed saw demand for the Pound rise.
However, with the CBI reported retail sales index forecast to remain firmly entrenched within negative territory the bullish mood of GBP exchange rates could soon fade.
German Business Expectations Drop Drives Euro Lower
Although the IFO business climate index saw a modest improvement on the month this was ultimately overshadowed by a surprise decline in the accompanying expectations index. This signal of continued anxiety within the German economy fuelled speculation that a potential recession could still be on the cards. Given the weakness of recent German data this latest sign of bearishness weighed heavily on the single currency.
A similarly disappointing reading from the GfK consumer confidence index may add to the negative mood of EUR exchange rates today.
Weakening Confidence Dents US Dollar Demand
While the Richmond Fed manufacturing index failed to ease quite as far as forecast, clocking in at -9 rather than -11, the US Dollar still slumped. With the world’s largest economy continuing to display evidence of a slowdown the strength of USD exchange rates remained limited. The weakness of the US Dollar was exacerbated by a sharp dip in September’s consumer confidence index, which unexpectedly eased on the month.
Any increase in market risk-aversion could offer USD exchange rates a rallying point in the short term.
Oil Price Weakness Weighs on Canadian Dollar
A fresh decline in global oil prices dragged on the commodity-correlated Canadian Dollar overnight. Even though investors now see less risk of the Bank of Canada (BOC) cutting interest rates in the months ahead this was not enough to keep CAD exchange rates on a positive footing. As concerns over the outlook of the oil market remain the mood towards the Canadian Dollar soured.
Unless US oil production shows signs of easing CAD exchange rates look set to remain biased to the downside.
New Zealand Dollar Strengthens Ahead of RBNZ Meeting
Growing anticipation ahead of the Reserve Bank of New Zealand’s (RBNZ) September policy meeting failed to keep the New Zealand Dollar under pressure. With policymakers expected to leave interest rates on hold at this stage the potential for fresh NZD exchange rate losses appears limited. Even though market risk appetite proved muted the New Zealand Dollar was able to gain ground against its rivals.
If RBNZ policymakers show greater signs of dovishness, even if interest rates remain on hold, the appeal of the New Zealand Dollar could diminish sharply.
Data Releases
September 25th 12:00 NZD Reserve Bank of New Zealand Rate Decision 1.0%
September 25th 16:00 EUR German GfK Consumer Confidence Index (OCT) 9.6
September 25th 20:00 GBP CBI Reported Sales (SEP) -25