Australian Dollar (AUD) Supported by Chinese Stimulus Boost
The Australian Dollar (AUD) was buoyed on Thursday by supportive economic measures in China, as the country’s Cabinet introduced a $146bn (¥1tln) stimulus package midweek.
Given the ‘Aussie’s’ role as a proxy for China’s economy, the cash injection boosted AUD. Furthermore, the measure helped to raise global risk sentiment, lending further tailwinds to risk-on currencies.
Today, the Australian Dollar will likely take further direction from risk sentiment, potentially surrendering gains if markets turn bearish.
New Zealand Dollar (NZD) Firms on Risk-On Mood
The New Zealand Dollar (NZD) ticked up alongside its sister currency toward the end of the week, as upbeat trading sentiment attracted support to the risk-sensitive asset.
Also lending potential tailwinds, dairy products rose in value – one of New Zealand’s key exports. Potentially capping further gains was Wednesday’s NZ retail data, which revealed that domestic sales volumes fell in Q2 2022.
The ‘Kiwi’ is likely to trade on external factors today given a lack of significant economic data.
Pound (GBP) Gains Capped by UK Energy Crisis
The Pound (GBP) managed to climb against several peers on Thursday, although tailwinds were limited by ongoing concerns regarding the UK’s energy crisis.
The British Chambers of Commerce (BCC) warned that time was running out to offer households and businesses the support they need to protect jobs and livelihoods.
On the other hand, August’s distributive trades balance from the Confederation of British Industry (CBI) printed vastly better than expected, at 37 rather than the -7 forecast. This lent some support to Sterling.
Into today, the Pound may be subdued by a resumption of low risk appetite. If Ofgem raises October’s energy price cap beyond the £3,554 forecast, Sterling is likely to drop against its rival currencies.
Euro (EUR) Trends Down despite Upbeat Data
The Euro (EUR) fell against its peers yesterday despite positive trading stimulus; risk-on tailwinds were also insufficient to override ongoing recession fears.
Finalised GDP growth in Germany printed marginally higher than original estimates and business climate data for the bloc’s largest economy likewise impressed, edging only slightly lower than last month’s reading.
Furthermore, members of the European Central Bank (ECB) struck a hawkish tone according to August’s meeting minutes, easily reaching a consensus on a 50bps interest rate hike.
US data may influence the Euro today, with a downturn in the US Dollar (USD) triggering a potential EUR upside.
US Dollar (USD) Makes Tentative Gains
The US Dollar (USD) began Thursday’s European session weakening on account of risk-on trading sentiment but managed to recoup some losses as the day wore on.
A smaller-than-expected contraction in America’s economy in Q2 – according to analysts’ second estimate – supported USD, alongside fewer initial jobless claims last week compared with the week previous.
Today, the PCE price index for the year to July is likely to inspire movement, being the Federal Reserve’s preferred measure of inflation. If the index declines as forecast, the ‘Greenback’ may face headwinds on reduced rate hike bets.
Furthermore, Fed Chairman Jerome Powell’s speech at the Jackson Hole Symposium could inspire USD movement overnight, as he is expected to offer some insight in the bank’s future policy.
Canadian Dollar (CAD) Wavers as Oil Prices Inch Down
The Canadian Dollar (CAD) traded in a mixed range yesterday as oil prices ticked back down, following yesterday’s surge following OPEC’s production cut announcement.
Data Releases
Aug 26th 22:30 USD PCE Price Index (Jul) 6.2%
Aug 27th 00:00 USD Fed Chair Powell Speech N/A