Australian dollar (AUD) RBA meeting likely to see cash rate held steady
The Australian dollar (AUD) is in focus today as the Reserve Bank of Australia (RBA) meeting approaches. The RBA is widely expected to keep the cash rate on hold in a straightforward decision, with markets shifting their attention to the tone of the statement and Governor’s post-meeting press conference.
Since the last board meeting, economic data has either softened or aligned with the RBA’s expectations. Given this, Commonwealth Bank of Australia (CBA) analysts anticipate a slightly less hawkish stance, especially considering recent offshore developments, such as the Federal Reserve’s aggressive 50bps rate cut.
Any change in tone in the RBA statement, or hints from the RBA Governor on when the first rate cut may be, may cause some large movements in the AUD.
New Zealand dollar (NZD) weighed down by weak trade balance data
Yesterday, the New Zealand dollar (NZD) was underpinned by weak trade balance data, revealing a monthly deficit of $2.2 billion. Despite strong kiwifruit exports, the broader data pressured the NZD.
No local data is scheduled for today, so attention will shift to the RBA meeting this afternoon. Any change in tone from the RBA’s accompanying statement could have significant implications for the NZD/AUD pair.
US dollar (USD) recovery undermined by Fed rate cut bets
The US dollar (USD) got off to an uneven start this week. USD exchange rates initially ticked higher on Monday as markets were spooked by the worrying Eurozone PMIs.
However, the ‘greenback’ subsequently relinquished these gains through the US trading session amid growing bets for another 50bps interest rate cut from the Federal Reserve.
Meanwhile, the release of the latest US consumer sentiment survey could drag on the US dollar as household sentiment is forecast to have deteriorated this month.
Pound (GBP) undermined by UK PMIs
The pound (GBP) was subdued through yesterday’s session, following the release of a mixed UK services PMI.
While growth in the UK’s vital services sector proved more modest than expected, the index highlighted underlying strength in the sector, which helped to limit Sterling selling pressure.
In the absence of any notable UK economic data, the pound may struggle to find direction.
Euro (EUR) slumps on dire Eurozone PMIs
The euro (EUR) tumbled on Monday, in response to the Eurozone’s weaker-than-expected PMIs.
August’s preliminary figures reported the bloc’s private sector contracted for the first time since January, with a particularly worrying decline in Germany’s manufacturing sector stoking fears the Eurozone’s largest economy is currently in a recession.
Coming up, Germany will publish its latest IFO business climate index later this morning. Expect to see the euro extend its losses if it reports morale continued to deteriorate this month.
Canadian dollar (CAD) buoyed by rising oil prices
The Canadian dollar (CAD) traded with modest gains on Monday, as the appeal of the commodity-linked currency was buoyed by an appreciation of oil prices.
Tonight will see a speech delivered by the Bank of Canada (BOC) governor Macklem. Traders will attempt to gauge the future path for interest rates for the BOC, and any hints of further interest rate cuts may dent the CAD.