Australian dollar (AUD) softens on China concerns
The Australian dollar (AUD) came under pressure at the start of the week as market sentiment remained dampened by concerns about China’s economic outlook.
Further weighing on the ‘Aussie’ was a drop in iron ore prices, one of Australia’s key exports.
With no notable Australian data releases today, the AUD may continue to struggle as investors remain cautious of China’s growth prospects.
New Zealand dollar (NZD) weighed down by risk-off mood
The New Zealand dollar (NZD) was similarly subdued on Monday, with the risk-off mood impacting demand for the ‘Kiwi’.
Additionally, expectations that the Reserve Bank of New Zealand (RBNZ) will hold interest rates steady for the foreseeable future placed further pressure on NZD exchange rates.
Looking ahead, the NZD is likely to remain sensitive to global risk sentiment and US dollar dynamics in today’s session.
US dollar (USD) pressured by Fed rate cut bets
The US dollar (USD) faced broad-based weakness at the start of this week, amid a hardening of bets for a 50 basis point interest rate cut from the Federal Reserve on Wednesday.
According to CME’s FedWatch tool, the odds have now tipped in favour of a more aggressive cut, with the probability of a 50bps cut climbing to 65%, from just 30% just a week ago.
Turning to today’s session, the US dollar may come under additional pressure as the latest US retail sales figures are expected to report a notable slowing of sales growth last month.
Pound (GBP) supported by upbeat mood
The pound (GBP) trended broadly higher through yesterday’s trading session, with Sterling underpinned by improving market sentiment.
The upside in GBP exchange rates was also supported by expectations the Bank of England (BoE) will diverge from the European Central Bank (ECB) and Federal Reserve by keeping interest rates on hold this month.
In the absence of any notable UK data, the direction of the pound may remain dependant on market sentiment today as GBP investors await the BoE’s rate decision on Thursday.
Euro (EUR) dented by risk-on mood
The euro (EUR) was pulled in two different directions on Monday. Acting as a headwind for the single currency was the prevailing risk-on mood.
However, this was at least partially countered by comments from ECB policymakers indicating the bank is in no rush to continue cutting interest rates.
Coming up, Germany will publish its latest ZEW economic sentiment index later this morning. Economists forecast that morale will continue to deteriorate this month, likely placing pressure on the euro.
Canadian dollar (CAD) softens despite rising oil prices
The Canadian dollar (CAD) was pressured by its positive correlation with the US dollar on Monday, which left the commodity-sentiment ‘loonie’ unable to benefit from rising oil prices.
Looking ahead, CAD exchange rates may weaken today as Canada’s latest consumer price index is expected to report domestic inflation cooled last month.
Data Releases
10:00 EUR German ZEW Economic Sentiment Index (Sep)
13:30 USD Retail Sales (Aug)
13:30 CAD Inflation Rate (Aug)