Australian Dollar (AUD) Tumbles on Bearish Market Sentiment
The Australian Dollar (AUD) slumped in mid-week trade, the currency being undermined by a slump in risk appetite and weaking commodity prices.
The release of a weaker-than-expected wage price index also contributed to the downside in the ‘Aussie’ as its sapped Reserve Bank of Australia (RBA) rate hike bets.
Today, the latest AU jobs report is likely to influence ‘Aussie’ exchange rates. If unemployment holds at a record low in July, the ‘Aussie’ could firm.
New Zealand Dollar (NZD) Falls despite Interest Rate Hike
The New Zealand Dollar (NZD) tumbled on Wednesday despite a 50bps rate hike from the Reserve Bank of New Zealand (RBNZ).
After initially spiking the ‘Kiwi’ quickly relinquished its gains as RBNZ Governor Adrian Orr struck a broadly cautious tone in his press conference.
The ‘Kiwi’ may remain subdued today by risk-off headwinds; also denting NZD sentiment could be expectations for an increase in New Zealand’s trade deficit.
Pound (GBP) Pressured by Higher-Than-Expected Inflation
Trade in the Pound (GBP) was mixed against its peers yesterday as UK inflation hit 10.1% for the year to July.
Inflation had been expected to print at 9.8% but exceeded forecasts as electricity prices rose by an eye-watering 54%.
While GBP investors are hopeful the figures will lead to more aggressive interest rate hikes from the Bank of England, economists warned that inflation is dragging on the economy and increasing the risk of recession.
Today, a lack of domestic data leaves Sterling to trade on external factors, likely sinking if risk appetite remains weak.
Euro (EUR) Strengthens despite Mixed Data from the Eurozone
The Euro (EUR) was able to climb against several peers in mid-week trade, as its relative safe-haven status supported the single currency against perceived riskier assets.
EUR was able to shrug off weaker-than-expected employment and GDP data, as economists noted that the labour market data still demonstrated healthy improvement: the number of those in employment rose by 0.3% in Q2. Meanwhile, an economic expansion of 0.6% was widely considered positive.
Finalised inflation data could influence the Euro today, if it differs significantly from earlier estimates. Otherwise, EUR appeal may be dampened by strength in the US Dollar.
US Dollar (USD) Boosted by Risk-Off Mood
The US Dollar (USD) firmed on Wednesday, supported by bearish market sentiment. A standstill in US retail sales failed to dent the currency, as excluding gas and autos, sales jumped by 0.7%.
Analysts observed a price-related fall in gasoline sales, which they noted ‘frees up households to increase spending on other goods’; according to Capital Economics, real consumption rose by as much as 0.5% last month.
Today, USD investors are likely to trade on Federal Reserve dynamics, given last night’s release of the FOMC minutes. Also affecting the ‘Greenback’ today may be jobless claims and the Philadelphia Fed’s manufacturing index.
Canadian Dollar (CAD) Softens amid Oil Price Weakness
The Canadian Dollar (CAD) fell against several peers yesterday as oil prices remained close to Tuesday’s multi-month low.
Today’s PPI release could inspire further undermine CAD exchange rates, if prints at below last month’s annualised reading as forecast.
Data Releases
Aug 18th 11:30 AUD Unemployment Rate (Jul) 3.5%
Aug 18th 11:30 AUD Employment Change (Jul) 25K
Aug 18th 19:00 EUR Inflation Rate Final (Jul) 8.9%
Aug 18th 22:30 CAD PPI (Jul) 12%
Aug 18th 22:30 USD Initial Jobless Claims (13/Aug) 265K
Aug 18th 22:30 USD Philadelphia Fed Manufacturing Index (Aug) -5
Aug 19th 03:20 USD Fed George Speech N/A
Aug 19th 03:45 USD Fed Kashkari Speech N/A