Australian Dollar (AUD) Trends Down on Risk Aversion
The Australian Dollar (AUD) sank against the majority of its peers on Friday as risk sentiment was subdued on renewed concerns over the Chinese economy.
The indebted Chinese property giant Evergrande missed a crucial interest payment deadline of $83.5mn on Thursday, without comment from the company. If Evergrande is unable to pay the outstanding interest within a 30-day grace period it will default, potentially sending ripples through the Chinese economy and beyond.
Looking ahead to this week, preliminary retail sale figures for the month of August may influence AUD dynamics. In the meantime, the Australian Dollar is likely to take direction from overall market sentiment.
Pound (GBP) Clings to Bank of England (BoE) Tailwinds
The Pound (GBP) traded in a mixed range on Friday as tailwinds from the Bank of England (BoE) recent rate decision began to fade.
GBP traders interpreted Thursday’s comments from the central bank with bullish optimism, as policymakers conceded that that the case for modest monetary policy tightening strengthened from August.
A lack of data today means Sterling performance is likely to be driven by risk sentiment, alongside any political developments. BoE consumer credit may provide trading stimulus next Wednesday.
Euro (EUR) Wavers on Business Climate Headwinds
The Euro (EUR) fluctuated against its peers on Friday as Germany’s Ifo Business Climate data disappointed. A risk-off market mood exacerbated downside pressure.
German data revealed the lowest reading in five months, as supply shortages in industry worsened with no signs of constrains easing. Losses were capped, however, by the reading’s proximity to estimates. Initial forecasts predicted a reading of 98.5 – which Friday’s data exceeded.
Germany’s election on Sunday is causing additional uncertainty as markets anticipate a change in governance. According to analysts, the SPD remains in prime position to lead a new coalition, between the Social Democrats, Greens and Federal Democrats (FDP).
US Dollar (USD) Benefits from Risk-On Mood
The US Dollar (USD) rose against its peers through Friday’s session as a risk-off market mood drew support to the ‘Greenback’. Markets traded with bearish caution on Evergrande concerns: USD was also supported by hawkish comments from Federal Reserve officials.
Cleveland Federal Reserve Bank President Loretta Mester reported that the central bank will take action if inflation is not consistent with goals, adding ‘Asset purchases are not doing as much now and I think Fed can reduce the pace.’
Looking ahead, US durable goods orders on Monday may affect USD sentiment, alongside the Dallas Fed manufacturing index. Both releases are expected to gain on last month, potentially bolstering the appeal of the US Dollar.
Canadian Dollar (CAD) Finds Support on Oil Price Rise
The Canadian Dollar (CAD) gained against the majority of its peers on Friday, as oil prices rose higher on supply concerns. WTI crude hit a monthly high and held onto support throughout the session, on track for a 2% lift over the course of the week.
New Zealand Dollar (NZD) Drops on Disappointing Trade Data
The New Zealand Dollar (NZD) fell on Friday’s session on headwinds from a disappointing balance of trade earlier in the week. Analysts predicted a N$-633m deficit- but instead, data revealed a drop to $N-2144m.
Friday’s risk-off mood also subdued ‘Kiwi’ trading sentiment, alongside a fall in the Australian Dollar. As Australia is New Zealand’s second-biggest trading partner, a correlation exists between AUD and NZD.
Data Releases
| Sep 27th 22:30 | USD | Durable Goods Orders (Aug) | 0.6% |