Australian Dollar (AUD) Goes Down with Commodity Prices
The Australian Dollar (AUD) fell against the majority of its peers yesterday as Covid cases rose in New South Wales and commodity prices fell in response to new Chinese import restrictions.
Also limiting movement in AUD at the start of the week is today’s interest rate decision. Although the Reserve Bank of Australia (RBA) is not expected to increase the cash rate until 2024, the central bank hinted that bond-buying will lower to AU$4bn per week in early September, while warning that the economic outlook depends upon the Covid situation.
If the RBA use this afternoon’s announcement to introduce new tapering measures, AUD could find support on hawkish messaging.
Pound (GBP) Struggles Over Brexit Concerns
Tensions are high over the Northern Ireland Protocol part of the Brexit deal, with business leaders, trade unions and academics urging the UK and EU to deliver ‘balanced, bespoke and reasonable’ solutions.
The Pound (GBP) also struggled to overcome headwinds over new taxation measures to be announced today. National Insurance Contributions would increase funding for the NHS and social care – but a number of cabinet ministers are against the move.
Given yesterday’s lower-than-expected construction PMI, the Pound may see a loss of support into today’s session, without any significant data to bolster GBP sentiment.
Euro (EUR) Resists Downside Pressure Ahead of Interest Rate Decision
The Euro (EUR) is currently resisting headwinds ahead of Thursday’s interest rate decision and European Central Bank (ECB) press conference. Investors hope for clues as to when tapering may commence.
German factory orders for July printed above expectations yesterday morning, lending support to the single currency – orders were predicted to contract by 1%, but instead rose by 3.4%.
Ahead of the rate decision, this evening will reveal the Euro area GDP growth rate, as well as the German ZEW economic sentiment index. Mixed data may limit EUR gains.
US Dollar (USD) Trends Up Despite Lack of Activity
Considering the United States’ national holiday yesterday, the US Dollar traded well against the majority of its peers.
A risk-on mood was tempered by new coronavirus fears and political developments, attracting support for the safe-haven USD.
A dovish outlook from the Federal Reserve bank will likely cap tailwinds, however: chairman Jerome Powell recently cited ‘significant slack’ in the labour market. Friday’s speeches by Fed representatives may clarify the central bank’s ongoing stance.
Canadian Dollar (CAD) Founders on Low Oil Prices
A lack of Canadian data through yesterday’s session left the Canadian Dollar (CAD) at the mercy of oil dynamics, which resulted in mixed support.
The ‘Loonie’ resisted significant losses, but gains were capped by pressured WTI prices, which fell to around $68.10 from highs of $70 last week.
Wednesday’s Ivey PMI may help to lift CAD, if the index prints at 56 as expected – a negligible drop from last month’s 56.4.
New Zealand Dollar (NZD) Relinquishes Gains amid Coronavirus Concerns
The New Zealand Dollar (NZD) faced headwinds yesterday as Auckland remains in lockdown following a surge in Covid cases. While the regions outside the city see some restrictions ease today, Aucklanders face another week of level 4 conditions.
Thursday’s manufacturing sales may support the ‘Kiwi’, if they expand by 15% as expected.
Data Releases
Sep 7th 08:30 AUD Ai Group Services Index (Aug) 53
Sep 7th 14:30 AUD RBA Interest Rate Decision 0.1%
Sep 7th 16:00 EUR German Industrial Production (Jul) 0.9%
Sep 7th 19:00 EUR Euro Area GDP (Q2) 2%
Sep 7th 19:00 EUR Euro Area ZEW Economic Sentiment Index (Sep) 30
Sep 7th 19:00 EUR German ZEW Economic Sentiment Index (Sep) 30