Australian dollar (AUD) climbs on corporate borrowing surge
The Australian dollar (AUD) caught bids at the end of last week on the back of data showing business credit surged 1.4% in July.
The sharp uptick in corporate borrowing was seen as a vote of confidence in the Australian economy and bolstered bets that the Reserve Bank of Australia (RBA) may keep interest rates higher for longer.
Turning to the start of this week, the ‘Aussie’ may face headwinds after the release of China’s latest PMIs over the weekend highlighted the sluggish growth of Australia’s largest trading partner.
New Zealand dollar (NZD) buoyed by upbeat mood
The New Zealand dollar (NZD) ticked higher on Friday, supported by improving risk appetite and its positive correlation with the Australian dollar.
Movement in the ‘kiwi’ is likely to remain tied to market risk dynamics today, with NZD exchange rates poised to fall if sentiment softens in the wake of underwhelming Chinese data.
Pound (GBP) pressured by tax hike speculation
The pound (GBP) closed last week on the defensive, amid growing concern over the likely tax moves of Chancellor Rachel Reeves in her autumn budget.
Markets are growing increasingly nervous amid speculation that tax hikes needed to plug a sizable gap in public funding will choke off UK economic growth.
In the absence of any notable UK economic releases, the pound may struggle to find direction today.
Euro (EUR) subdued despite rise in German inflation
The euro (EUR) was mostly muted on Friday despite Germany’s latest consumer price index printing above expectations.
The flash CPI reading reported inflation climbed from 2% to 2.2% in August, outpacing forecasts for a more modest rise to 2.1%.
This week opens with the release of the Eurozone’s latest unemployment figures. If the jobless rate remains at a record low of 6.2% it could offer some modest support for the euro.
US dollar (USD) buoyed by rising inflation
The US dollar (USD) firmed at the end of last week as the Federal Reserve’s preferred indicator for inflation – the core PCE price index – climbed to a five-month high of 2.9%.
While this didn’t impact bets for a September rate cut, it prompted some USD investors to trim their bets for an additional 50 basis points of cuts through the remainder of 2025.
US data is in short supply at the start of this week, potentially leaving the ‘greenback’ to be influenced by events in Washington.
Canadian dollar (CAD) undermined by sizable slump in GDP
The Canadian dollar (CAD) faced headwinds on Friday after Canada’s latest GDP figures reported a larger-than-expected contraction in the second quarter.
The focus for CAD investors may turn back to oil prices at the start of this week, with the commodity-linked ‘loonie’ potentially coming under additional pressure if prices continue to soften.
Data Releases
19:00 EUR Unemployment Rate (Jul)