Australian dollar (AUD) slides as RBA lowers rates
The Australian dollar (AUD) weakened yesterday after the Reserve Bank of Australia (RBA) cut interest rates by 25 basis points.
Although the cut was expected, dovish comments from RBA Governor Michele Bullock weighed heavily on AUD. Bullock said that the bank does ‘not rule out back-to-back rate cuts’.
Today, lingering headwinds from the RBA decision could keep the ‘Aussie’ on the defensive. Any shifts in risk appetite could also affect AUD.
New Zealand dollar (NZD) slips in tandem with AUD
The New Zealand dollar (NZD) also weakened yesterday due to a risk-off market mood and NZD’s strong trading relationship with AUD.
Market risk dynamics may drive the ‘kiwi’ today. Could a risk-on mood see the New Zealand dollar regain some lost ground?
Pound (GBP) jumps as jobs data beats forecasts
The pound (GBP) strengthened yesterday as stronger-than-expected British jobs data tempered bets on further interest rate cuts from the Bank of England (BoE).
Although the latest report indicates that the UK labour market continues to cool, the slowdown was far less pronounced than feared, leading market participants to further scale back expectations for BoE rate cuts.
Turning to today, Sterling may be muted as GBP investors exercise caution ahead of tomorrow’s UK GDP figures, which have the potential to sink the pound.
Euro (EUR) cushioned by decline in USD
The euro (EUR) was mixed yesterday, with the currency facing a challenge at the start of the European session due to a larger-than-forecast decline in German economic sentiment in August.
However, EUR was able to avoid steeper losses and even rise against some rivals, thanks in part to the euro’s strong negative correlation with a weaker US dollar (USD).
Germany’s final inflation reading for July is unlikely to impact EUR today, unless it deviates from the preliminary estimate. As a result, the euro may be primarily driven by Ukraine news and USD movement.
US dollar (USD) undermined by cooler inflation figures
The US dollar also faced uncertain movement yesterday, with the safe-haven currency initially firming against riskier rivals thanks to a cautious market mood.
Later in the session, however, the latest US consumer price index dented USD. The CPI was slightly cooler than anticipated, with headline inflation holding steady in July at 2.7% rather than rising to 2.8%.
American economic data is thin on the ground today. Therefore, market risk appetite may be the defining factor for the safe-haven US dollar.
Canadian dollar (CAD) slips as oil prices fall
The crude-linked Canadian dollar (CAD) fell against its stronger peers yesterday, with declining oil prices and the post-CPI drop in USD both dragging on the ‘loonie’.
Oil price movements may continue to determine CAD’s direction again today. If crude prices weaken again, the Canadian dollar could struggle.
Data releases
16:00 EUR German Wholesale Prices (Jul)
16:00 EUR German Inflation Rate (Jul)