Australian Dollar (AUD) Rises on Risk-On Mood
The Australian Dollar (AUD) climbed at the beginning of the week in spite of weaker-than-expected Chinese data. Headwinds from China can subdue AUD due to its role as a proxy for the Chinese economy.
Nevertheless, the ‘Aussie’ firmed as equities rose and markets turned bullish. In addition, investors expect the Reserve Bank of Australia (RBA) to raise interest rates by 50bps today, which boosted AUD morale.
If the RBA hikes as expected, the Australian Dollar could enjoy an upside. However, AUD investors will also be interested in the bank’s forward guidance.
New Zealand Dollar (NZD) Bolstered by Strong Australian Dollar
The New Zealand Dollar (NZD) firmed on Monday, buoyed in part by strength in its sister currency.
Also boosting the ‘Kiwi’ may have been the performance of New Zealand’s key commodities as milk and beef rose in value. Meanwhile, markets are pricing in a hawkish rate hike trajectory for the Reserve Bank of New Zealand (RBNZ).
Tomorrow, New Zealand jobs data could affect the currency. Employment is expected to have risen in Q2 while unemployment looks to have fallen. Today, movements in AUD could impact NZD due the currencies’ positive correlation.
Pound (GBP) Rises despite Slump in Factory Growth
The Pound (GBP) traded broadly higher yesterday despite a fall in UK factory growth. Factory output hit a two-year low as companies suffered from weaker market demand among other factors.
The upside in Sterling came as markets expect the Bank of England (BoE) to raise interest rates by 0.5% at its meeting later this week.
A lack of significant data leaves Sterling to trade on external factors today. Any developments in British politics could influence GBP, as Tory leadership candidates battle for support.
Euro (EUR) Wavers as EU Data Prints Mixed
The Euro (EUR) traded in a mixed range on Monday as German retail data disappointed while an upbeat EU jobs report lent support to the single currency.
German retail sales fell by 1.6% in June rather than climbing by 0.2% as expected, with rising prices weighing on affordability. Meanwhile, the Euro area unemployment rate remained at a record low.
Into today, EUR may trade on US Dollar (USD) dynamics, given a lack of data from the Eurozone. USD weakness could buoy the Euro on account of the currencies’ strong negative correlation.
US Dollar (USD) Drops although PMI Exceeds Forecasts
The US Dollar weakened at the beginning of the week despite July’s manufacturing data printing above forecasts.
The ISM PMI came in at 52.8 – only 0.2 below June’s reading – rather than the expected 52. Nevertheless, the ‘Greenback’ fell on uncertain forecasts for the Federal Reserve as well as continuing headwinds from last week’s GDP contraction.
US JOLTs data could dampen support for USD today: job openings are expected to narrow, potentially reflecting a slackening demand for labour amidst a weaker economy.
Canadian Dollar (CAD) Sinks on Oil Price Dynamics
The Canadian Dollar (CAD) dipped yesterday as worries about an economic downturn pushed down the value of crude oil.
Contributing to fears was a contraction in Chinese manufacturing activity in July. The NBS Manufacturing PMI in China came in at 49, below the threshold for growth.
Today’s Canadian PMI is expected to reveal a slowing of expansion in the manufacturing sector, potentially denting the ‘Loonie’.
Data Releases
Aug 2nd 14:30 AUD RBA Interest Rate Decision 1.85%
Aug 2nd 23:30 CAD S&P Global Manufacturing PMI (Jul) 54
Aug 3rd 00:00 USD JOLTs Job Openings (Jun) 11m
Aug 3rd 00:00 USD Fed Evans Speech N/A