Australian Dollar (AUD) Dented by Cooling Inflation
The Australian Dollar (AUD) weakened yesterday after Australian inflation cooled more than forecast in July, dampening Reserve Bank of Australia (RBA) interest rate hike bets.
However, the risk-sensitive ‘Aussie’ was spared steeper losses as an improving market mood boosted the currency’s appeal.
Looking ahead, the Australian Dollar will be left exposed to external factors today amid a lack of market-moving economic data. If the upbeat mood persists, AUD could regain ground.
New Zealand Dollar (NZD) Dented amid RBNZ Rate Cut Talk
The New Zealand Dollar (NZD) also fell yesterday amid talk of rate cuts from the Reserve Bank of New Zealand (RBNZ) as early as next year.
As with the ‘Aussie’, however, an improving mood limited losses.
Turning to this afternoon, the ‘Kiwi’ could be boosted by a significant improvement in business morale. The latest business outlook index is predicted to rise from -13.1 to -1.9, the highest level since June 2021.
Pound (GBP) Supported by Rate Hike Bets
The Pound (GBP) found renewed support yesterday amid expected policy divergence between the Bank of England (BoE) and other central banks.
With UK inflation still far above the target rate, expectations that the British central bank will continue tightening buoyed GBP.
During today’s session, a speech from BoE Chief Economist Huw Pill could send Sterling lower if he strikes a dovish note. Fears of a looming recession could prompt a more cautious tone from the BoE policymaker.
Euro (EUR) Buoyed by Stronger-than-Expected German Inflation
The Euro (EUR) climbed against some of its peers yesterday as German inflation surprised to the upside.
Inflation in Europe’s largest economy printed at 6.1% rather than the expected 6%. The data indicated that the European Central Bank (ECB) still has some work to do.
This evening, the Eurozone consumer price index will be the focus. Headline and core inflation are forecast to ease, which could dent EUR exchange rates.
US Dollar (USD) Sinks on Slowing Jobs Growth
The US Dollar (USD) struggled to attract support yesterday as the latest ADP employment change figure revealed weaker-than-expected jobs growth.
Further signs that the stubbornly tight labour market is finally cooling weighed on the ‘Greenback’. Reduced rate hike bets from the Federal Reserve sapped USD demand.
Looking ahead, the Fed’s preferred measure of inflation could give further clues to the central bank’s next movement. The core PCE price index is expected to remain sticky, which could prompt the Fed to keep hiking rates, which would likely boost USD.
Canadian Dollar (CAD) Softens in Tandem with USD
The Canadian Dollar (CAD) weakened considerably on Wednesday, due to its close trading relationship with the US Dollar. As the ‘Greenback’ slumped on pared rate hike bets, the ‘Loonie’ also fell.
In the absence of any notable Canadian data, movement in the ‘Loonie’ could be tied to USD exchange rates again today.
Data Releases
31st Aug 11:00 NZD ANZ Business Confidence (Aug) -1.9
31st Aug 17:00 EUR ECB Schnabel Speech
31st Aug 17:15 GBP BoE Pill Speech
31st Aug 19:00 EUR Inflation Rate (Aug) 5.1%
31st Aug 19:00 EUR Unemployment Rate (Jul) 6.4%
31st Aug 22:30 USD Core PCE Price Index (Jul) 4.2%