Australian dollar (AUD) strengthens in risk-positive trade
The Australian dollar (AUD) got off to a healthy start this week, with the currency drawing support from positive market risk sentiment.
This was primarily driven by US dollar (USD) weakness, which was enough to offset underwhelming Chinese economic indicators.
Coming up, AUD investors may look to a speech by Reserve Bank of Australia (RBA) Chief Economist Sarah Hunter for fresh impetus today. If she strikes a hawkish tone, it may extend the upside in AUD.
New Zealand dollar (NZD) bolstered by upbeat risk sentiment
The New Zealand dollar (NZD) also rallied on Monday amid the improvement in investor risk appetite.
If this risk-on mood persists, the ‘kiwi’ may maintain a positive trajectory today.
Pound (GBP) rallies on BoE divergence
The pound (GBP) trended higher against the majority of its peers yesterday, supported by the expected divergence between the Bank of England (BoE) and other major central banks.
GBP investors are betting the BoE will leave its policy untouched through the remainder of the year, meaning higher interest rate returns for Sterling than many other currencies.
In the meantime, the UK’s latest jobs report could weigh on Sterling sentiment today if it reports that the UK labour market continued to cool in July.
Euro (EUR) pressured as French credit rating downgraded
The euro (EUR) ticked lower on Monday as EUR investors reacted to the news that ratings agency Fitch had downgraded France’s credit rating after Friday’s session closed.
However, the single currency’s losses were tempered, thanks to its inverse trading relationship with the US dollar.
Germany’s latest ZEW economic sentiment index will be in the spotlight for EUR investors today, with the euro poised to fall if this month’s survey reports another deterioration of morale.
US dollar (USD) slides on dovish Fed bets
The US dollar stumbled out of the gate this week, pressured by dovish bets ahead of the Federal Reserve’s interest rate decision on Wednesday.
A 25-basis-point rate cut is widely expected, but some USD investors are wary that there may be more than just token support for a 50bps cut this month.
Today sees the release of the latest US retail sales data. Sales growth is forecast to have slowed again last month, potentially compounding Fed rate cut bets and extending the USD decline.
Canadian dollar (CAD) subdued despite rising oil prices
The Canadian dollar (CAD) was muted on Monday as the currency’s positive correlation with the US dollar overshadowed a continued rise in oil prices.
Looking ahead, the focus for CAD investors today will be on Canada’s latest consumer price index. If inflation continued to undershoot expectations in August, it’s likely to cement bets for a Bank of Canada (BoC) rate cut on Wednesday and pull the ‘loonie’ lower.
Data releases
09:50 AUD RBA Hunter Speech
16:00 GBP Unemployment Rate (Jul)
19:00 EUR German ZEW Economic Sentiment Index (Sep)
22:30 CAD Inflation Rate (Aug)
22:30 USD Retail Sales (Aug)