Australian Dollar (AUD) Strengthens on Risk-On Mood
The Australian Dollar (AUD) firmed at the end of last week, bolstered by renewed risk appetite.
Risk-on sentiment was triggered by hopes that global inflationary pressures may soon ease, and reflected by a generally positive tone around equity markets. Also boosting the ‘Aussie’ may have been an increase in the price of Australia’s main exports – coal and iron ore.
If Chinese data reports an increase in retail sales and industrial production today, AUD may climb due to its status as a China proxy.
New Zealand Dollar (NZD) Firms as Business PMI Exceeds Forecast
The New Zealand Dollar (NZD) enjoyed tailwinds on Friday as New Zealand’s Business PMI printed at 52.7, rather than 49.2 as expected.
The unexpected expansion in business activity occurred as new orders rebounded and employment rose in July.
Also boosting the ‘Kiwi’ were optimistic expectations for the Reserve Bank of New Zealand (RBNZ). Economists considered that the central bank might announce its fourth consecutive 50bps rate hike this week.
Pound (GBP) Falls despite Smaller-Than-Expected Economic Contraction
The Pound (GBP) fell against its peers at the end of last week as June’s GDP release printed at -0.6%.
Quarterly GDP also fell, from 0.8% in Q1 to -0.1% in Q2. Although the contraction was smaller than forecast, it marks the first non-pandemic-restriction related decline since 2012.
According to analysts, an economic rebound in Q3 still seems likely, but the Bank of England (BoE) predicts a recession in Q4.
Looking ahead, the focus for GBP investors at the start of this week will be on the UK’s upcoming jobs report. Will a slowdown in wage growth drag on Sterling?
Euro (EUR) Sinks despite Industrial Production Tailwinds
The Euro (EUR) stumbled on Friday despite better-than-expected industrial production data.
Industrial production in the Euro area rose by 0.7% in June, compared with the 0.2% forecast –analysts attribute EUR’s subsequent downturn to widespread profit-taking. Concerns regarding economic growth and disrupted energy supplies also presented a threat to the single currency.
Today, the Euro may trade on risk sentiment or else USD dynamics, as a lack of significant data from the Eurozone leaves the currency exposed to external factors.
US Dollar (USD) Reverses Losses as Consumer Sentiment Improves
The US Dollar (USD) made a comeback at the end of last week, lifted by comments from the Federal Reserve as well as a better-than-expected consumer sentiment release.
Following a fall in inflation earlier in the week, Fed speakers reassured investors that the central bank is unlikely to cease interest rate hikes, as it judges that price pressures are persistent.
Elsewhere, the preliminary Michigan consumer sentiment index printed at 55.1 rather than 52.5 as expected.
The NY Empire State manufacturing index could cap further ‘Greenback’ gains today, if it falls to 5 from last month’s 11.1.
Canadian Dollar (CAD) Trades Mixed on Oil Outlook
The Canadian Dollar (CAD) softened on Friday, as the price of WTI crude oil fell and analysts predicted further losses ahead.
Data Releases
Aug 15th 22:30 USD NY Empire State Manufacturing Index (Aug) 5