Australian Dollar (AUD) Firms as US Dollar Falls
The Australian Dollar (AUD) trended higher against the majority of its peers on Friday as weakness in the US Dollar (USD) underpinned the risk-on ‘Aussie’.
Market sentiment was unsteady, with intermittent risk-on flows lending AUD support – coal and iron ore also climbed in value, boosting the currency.
Today, retail data may extend the Australian Dollar’s gains, if sales grew by 0.3% in July as forecast.
New Zealand Dollar (NZD) Subdued as Commodities Tumble
The New Zealand Dollar (NZD) dropped at the end of last week, unable to climb despite strength in its sister currency.
An unstable market mood likely applied pressure to the ‘Kiwi’, alongside a downturn in the value of beef and cheese – two key New Zealand exports.
NZD could take direction from AUD dynamics today, or else may trade on risk sentiment. If commodity prices continue to fall, the ‘Kiwi’ may slump further still.
Pound (GBP) Wavers as Ofgem Raises Energy Price Cap
The Pound (GBP) encountered headwinds on Friday as the energy regulator announced that the price cap would rise to £3,549 in October.
Ofgem acknowledged the price rise would cause difficulties, but said it had no choice given the increase in wholesale costs following Russia’s strangulation of supplies. Following the announcement, experts warned that the government must act with urgency or ‘lives could be lost.’
External factors will continue to affect Sterling exchange rates today, given a lack of domestic data. If financial support measures for households and business are announced, GBP could regain lost ground.
Euro (EUR) Gains as US Dollar Wavers
The Euro (EUR) rose against its peers at the end of last week amid European Central Bank (ECB) rate hike speculation. According to report ECB policymakers sought to discuss the possibility of a 75bps rate hike.
Also buoying the single currency was a downturn in US Dollar exchange rates, as investors turned bearish ahead of Federal Reserve Chairman Powell’s announcement. Given the strong negative correlation between EUR and USD, a downturn in the latter often triggers tailwinds for the Euro.
Today, a further lack of data leaves the single currency exposed to losses. If risk sentiment remains unsteady and the energy crisis persists, EUR may tumble.
US Dollar (USD) Weakens as Powell Strikes Moderate Tone
The US Dollar trended broadly lower through Friday’s European session as traders awaited an important address from Fed Chairman Jerome Powell at the Jackson Hole Symposium.
Powell’s speech opened with moderate remarks that were neither dovish nor overly hawkish: the central bank Chairman said the Fed would use its policy tools ‘forcefully’ ahead, but that there may be a period of sustained below-trend growth.
Simultaneously suppressing USD appeal was a drop in the PCE price index – the Fed’s preferred measure of inflation.
The Dallas Fed’s manufacturing index is expected to decline further tomorrow morning, potentially extending the ‘Greenback’s’ downtrend.
Canadian Dollar (CAD) Fluctuates on Oil Price Uncertainty
The Canadian Dollar (CAD) slipped against several peers at the end of last week despite a rise in oil prices on Friday.
Analysts considered prices for the black gold may rise higher still, if Saudi Arabia cuts production as indicated. Uncertainty over whether this will go ahead, however, limits gains for the ‘Loonie’.
Data Releases
Aug 29th 11:30 AUD Retail Sales Prelim (Jul) 0.3%
Aug 30th 00:30 USD Dallas Fed Manufacturing Index (Aug) -24
Aug 30th 04:15 USD Fed Brainard Speech N/A