Australian Dollar (AUD) Muted as Worries over Economic Outlook Linger
The Australian Dollar (AUD) struggled to find support on Friday in spite of growing hopes that a Covid-19 vaccine is on the horizon.
With the ongoing pandemic still having the potential to drag on economic growth in the third and fourth quarters, the sense of market optimism proved limited. This limited the potential for AUD exchange rates as confidence in the underlying health of the Australian economy remained muted in the absence of fresh data.
Without a stronger improvement in investor confidence, the Australian Dollar looks set to remain out of favour.
Pound (GBP) Slips despite Fourth Consecutive Month of UK Retail Sales Growth
The Pound (GBP) continued to weaken as investors shrugged off August’s positive UK retail sales data.
Although sales saw a fourth consecutive month of growth last month, this failed to bolster the appeal of the Pound. Better-than-expected sales growth of 0.8% month-on-month failed to impress investors as fears emerged of a dip in winter retail sales and new lockdown restrictions came into force in the north of England.
Markets’ lingering sense of Brexit-based anxiety could keep the Pound on a weaker footing in the absence of fresh UK data this week as UK-EU talks resume and the Internal Market Bill returns to Parliament.
Euro (EUR) Under Pressure as ECB Comments Raise Odds of Further Stimulus
The Euro (EUR) saw a mixed performance on Friday as comments from European Central Bank (ECB) policymakers provoked concerns.
Paolo Hernandez de Cos put fresh pressure on the single currency as he noted that it ‘can’t be ruled out’ that further policy stimulus could be needed in the months ahead. As the policymaker also acknowledged the loss of momentum in the Eurozone’s recovery seen in August, investors were left with little incentive to pile into the Euro.
The rising coronavirus infection rate in Europe will likely keep the pressure on EUR exchange rates this week as weekly cases topped 300,000 last week, with the WHO warning of a ‘very serious situation’.
US Dollar (USD) Struggles to Capitalise on Stronger Consumer Sentiment Index
The US Dollar (USD) found limited support as September’s University of Michigan consumer sentiment index picked up from 74.1 to 78.9, its highest reading since March but indicating a flat trend.
However, while consumer confidence ticked up, the second quarter US current account figure proved less encouraging in nature. As the deficit widened further-than-forecast on the quarter, highlighting the negative impact that the Covid-19 crisis had on the world’s largest economy.
As forecasts point towards an improvement in the latest Chicago Fed national activity index the US Dollar could find a fresh rallying point this evening.
Canadian Dollar (CAD) Slips as Canadian Retail Momentum Starts to Fade
The Canadian Dollar (CAD) extended its losses on Friday thanks to a weaker-than-expected showing from July’s retail sales data.
Sales saw growth of 0.6% on the month, following on from June’s 23.7% surge, raising fears that the initial recovery in sales momentum could prove temporary. With consumers adopting a less confident outlook in the face of ongoing global worries, the strength of CAD exchange rates diminished.
If the latest new housing price index fails to improve on the month this may fuel a fresh decline in demand for the Canadian Dollar.
New Zealand Dollar (NZD) Jumps as Finance Minister Rules out Interest Rate Cut
The New Zealand Dollar (NZD) pushed higher across the board in the wake of comments from NZ finance minister Grant Robinson at the end of last week.
A sense of bullishness gripped NZD exchange rates as Robinson indicated that the Reserve Bank of New Zealand (RBNZ) is expected to leave interest rates on hold until March. This hawkish signal gave the New Zealand Dollar a solid boost against its rivals, even though the general mood of markets remained jittery.
Once the initial impact of Robinson’s comments fades, though, this could leave NZD exchange rates vulnerable to renewed selling pressure.
Data Releases
18:00 EUR Spain Balance of Trade (Jul) €0.9 billion
22:30 CAD New Housing Price Index (Aug) 0.2%
22:30 USD Chicago Fed National Activity Index (Aug) 1.95