Australian dollar (AUD) weakens as leading index slips
The Australian dollar (AUD) softened yesterday as a modest recovery in the US dollar (USD) weighed on AUD.
In addition, an unexpected deterioration in Australia’s leading economic index put some pressure on the ‘Aussie’.
Today, attention shifts to the country’s latest jobs report. Signs of a stable labour market could boost the Australian dollar.
New Zealand dollar (NZD) pressured as USD firms
The New Zealand dollar (NZD) also edged lower against stronger rivals yesterday, with USD’s rebound putting some pressure on the ‘kiwi’.
NZD exchange rates may face headwinds today as the latest GDP data showed the New Zealand economy contracted in the second quarter.
Pound (GBP) firms following UK inflation figures
The pound (GBP) ticked higher yesterday after the UK consumer price index for August showed headline inflation holding at 3.8%, as forecast.
With inflation almost double the Bank of England’s (BoE) 2% target, the CPI reinforced bets that the BoE will leave interest rates unchanged today and potentially signal that another cut is unlikely in 2025.
Sterling could strengthen again later today if the BoE does strike a hawkish tone following its policy decision.
Euro (EUR) retreats amid profit-taking
The euro (EUR) weakened yesterday, with the single currency suffering some profit-taking after Tuesday’s impressive gains.
EUR was also weighed down by its negative correlation with a recovering US dollar and a slight downward revision to the Eurozone’s final inflation reading for August.
Eurozone data is in short supply today, potentially leaving EUR to be driven by USD movement, particularly in the wake of the Federal Reserve’s interest rate decision earlier this morning.
US dollar (USD) plunges following Fed decision
The US dollar initially ticked higher yesterday, crawling up from multi-month lows, as the wounded currency attracted some dip-buying following Tuesday’s selloff.
However, USD’s upward potential was ultimately capped by hesitancy ahead of the Federal Reserve’s policy decision and expected rate cut.
The US central bank did indeed cut interest rates by 25bps, while signalling that further cuts are likely in the coming months, seeing USD again mixed overnight. This could continue to pressure the ‘greenback’ through today’s session.
Canadian dollar (CAD) slides as BoC cuts rates
After initially inching higher in tandem with USD yesterday, the Canadian dollar (CAD) then retreated sharply in the evening as the Bank of Canada (BoC) cut interest rates by 25bps.
CAD could remain on the back foot today following the BoC decision, while oil price movements may also impact the crude-linked currency.
Data releases
04:00 USD Fed Interest Rate Decision
08:45 NZD GDP Growth Rate (Q2)
11:30 AUD Unemployment Rate (Aug)
21:00 GBP BoE Interest Rate Decision
22:30 USD Initial Jobless Claims (13/Sep)