Australian Dollar (AUD) Softens amid Widespread Risk Aversion
The Australian Dollar (AUD) tumbled against the majority of its peers in midweek trade, as a downbeat market mood sapped support for the risk-sensitive currency.
Global recession fears weighed upon investors’ sentiment while a resurgence of Covid cases in China also subdued the China-proxy. On the other hand, supportive measures from the People’s Bank of China (PBoC) continued to bolster the Chinese economy as well as AUD.
A lack of data today leaves the ‘Aussie’ to trade on external factors. If risk sentiment remains weak, AUD exchange rates could sink further.
New Zealand Dollar (NZD) Drops on Lack of Economic Stimulus
The New Zealand Dollar (NZD) sank on Wednesday, likewise pressured by risk-off headwinds amid increasing fears of a global recession.
Today, the New Zealand Dollar could be bolstered by the release of New Zealand’s latest retail sales figures amid forecasts sales growth will have rebounded in the second quarter.
Pound (GBP) Subdued despite 50bps Rate Hike Bets
The Pound (GBP) found some support at the beginning of yesterday’s European session, as bets for a 50bps rate hike at the Bank of England (BoE)’s next policy meeting buoyed the currency.
Sterling gains were soon reversed, however as politicians and economists worried over the implications of increasing energy prices. The head of Scottish Power proposed that for £100bn, the government could subsidise energy companies to implement a £2,000 price cap for consumers.
Today, distributive trades data is expected to print at -7, extending last month’s decline and likely denting GBP sentiment.
Euro (EUR) Tumbles as Recession Looks Likely
The Euro (EUR) weakened against the majority of its peers in midweek trade, amid quiet trading conditions in the bloc. The single currency struggled to make gains as risk-off sentiment drew investors to safe-haven currencies.
Meanwhile, comments from European Central Bank (ECB) policymaker Fabio Panetta observed that the probability of a recession was increasing because of the pandemic, the shock to commodity prices and the war in Ukraine.
Germany’s Ifo business climate data could influence EUR trading today. The Euro may weaken against its peers if the indicator drops to 86.8 as forecast this month.
US Dollar (USD) Climbs as Durable Goods Orders Stall
The US Dollar (USD) rose on Wednesday, despite durable goods orders stalling last month rather than rising as expected.
Lending support to the ‘Greenback’ was an upward revision to June’s reading, as well as an increase in orders excluding transportation items. Hawkish expectations for the Federal Reserve remained intact as markets hope for a 75bps interest rate hike in September.
If today’s GDP data reinforces earlier estimates that the US economy entered a technical recession in Q2, USD may fall – although the data will likely have been priced in already.
Canadian Dollar (CAD) Firms as Oil Price Resume Uptrend
The Canadian Dollar (CAD) enjoyed tailwinds yesterday as oil prices rose once more, to a three-week high.
Saudi Arabia hinted heavily overnight that the OPEC group could cut production to try and curb volatility in the oil market.
Data Releases
Aug 25th 08:45 NZD Retail Sales (Q2) 0.4%
Aug 25th 16:00 EUR German GDP Growth Rate Final (Q2) 0%
Aug 25th 18:00 EUR Ifo Business Climate (Aug) 86.8
Aug 25th 20:00 GBP CBI Distributive Trades (Aug) -7
Aug 25th 21:30 EUR ECB Monetary Policy Meeting Account N/A
Aug 25th 22:30 USD GDP Growth Rate 2nd Est (Q2) -0.8%
Aug 25th 22:30 USD Initial Jobless Claims (20/Aug) 253K