Australian Dollar (AUD) Climbs on Risk-On Mood
The Australian Dollar (AUD) rose against the majority of its peers on Friday as a risk-on mood supported the currency. High risk sentiment helped to elevate the ‘Aussie’ following a volatile week of trading.
Also supporting AUD, Chinese equities went up 7 points on Friday, reversing from a slight fall early in the Asian session. Given China’s strong trading relationship with Australia, Chinese growth bodes well for AUD.
A lack of data early next week leaves the ‘Aussie’ at the mercy of risk sentiment and trading dynamics. If Thursday’s services PMI prints as expected, the Australian Dollar may enjoy some support, although a dip in manufacturing could cap gains.
Pound (GBP) Stumbles on Poor Retail Data
The Pound (GBP) sank against several of its peers at the close of last week’s session, as UK retail sales dropped by 0.9%. August marks the fourth consecutive month of falls in sales data, making this the longest period of declines in at least 25 years.
Non-food stores reported a decline of 1% in trade – driven partly by falls in department stores. The biggest drop was in food store sales however: analysts suggest a shift in spending may have partially prompted the fall, as people return to eat out at hospitality venues.
A lack of UK data at the start of next week may leave the Pound directionless until the Bank of England (BoE) interest rate decision on Thursday. Investors will be hoping for hawkish signals from MPC members following this week’s high inflation.
Euro (EUR) Strengthens on Inflation Data
The Euro (EUR) gained against several of its peers on Friday as inflation data met forecasts. Inflation rose to 3%, the highest it’s been since November 2011 and well above the European Central Bank (ECB)’s target of 2.0 percent.
However, several ECB policymakers dismissed inflation pressures as temporary, tempering the Euro’s gains.
Looking ahead, Eurozone data next week may exert downside pressure upon the Euro as September’s consumer confidence flash is due to print lower than last month at -5.8.
US Dollar (USD) Buoyed by Rising Yields
The US Dollar (USD) firmed at the end of last week’s session, as the appeal of the ‘Greenback’ was bolstered in response to rising US Treasury yields.
However, the upside in USD exchange rates was tempered somewhat by the publication of the University of Michigan’s consumer sentiment, which revealed that US consumer morale ticked only up from the decade low struck in August.
Looking ahead, the spotlight this week will undoubtedly be on the Federal Reserve as it concludes its latest policy meeting, with USD investors eager to see if the Fed offers more clarity regarding its tapering plans.
Canadian Dollar (CAD) Resists Pressure from Oil Price Decline
The Canadian Dollar (CAD) extended its gains into the afternoon on Friday as trading sentiment kept the ‘Loonie’ afloat despite softer oil prices.
Monday’s federal election may cap gains for CAD going forwards, as the Conservative Party vie against the Liberals for public votes.
New Zealand Dollar (NZD) Falls to 16-Day Low
The New Zealand Dollar (NZD) fell against its peers on Friday as NZ’s business PMI printed below expectations at 40.1, pointing to the first contraction in the New Zealand manufacturing sector since December 2020.
Looking ahead, Monday’s services PSI could apply further downside pressure if a fall occurs, as forecast.
Data Releases
Sep 20th 08:30 NZD Services NZ PSI (Aug) 48
Sep 20th 16:00 EUR German PPI (Aug) 0.8%
Sep 20th 13:00 CAD Federal Election