Australian dollar (AUD) fluctuates amid shifting risk appetite
The Australian dollar (AUD) initially firmed on Thursday, with the currency rising through the Asian trading session amid a prevailing risk-on mood.
AUD exchange rates then faltered in overnight trade as sentiment began to sour again, as demand for the US dollar (USD) picked up.
In the absence of any notable Australian data, movement in the ‘Aussie’ is likely to be tied to market risk dynamics today. If a cautious mood prevails, the Australian dollar may struggle to catch bids.
New Zealand dollar (NZD) slumps as risk sentiment sours
The New Zealand dollar (NZD) slipped to a new multi-month low yesterday as the downturn in risk sentiment, coupled with domestic economic jitters, took its toll on the currency.
New Zealand’s latest consumer confidence index may provide support for the ‘kiwi’ today, after morale rebounded from the ten-month low struck in August.
Pound (GBP) slips as retail activity continues to decline
The pound (GBP) faltered on Thursday as the Confederation of British Industry’s (CBI) distributive trades index fell short of expectations.
The continued slump in retail sales volumes compounded concerns over the UK’s recent economic malaise and the challenges facing Chancellor Rachel Reeves.
Sterling may struggle to gain traction at the end of this week as a lull in data is likely to leave the currency without a strong directional bias.
Euro (EUR) undermined by USD strength
The euro (EUR) stumbled through yesterday’s session due to its negative correlation with the US dollar.
The downside in the single currency was somewhat limited by the release of the latest German consumer confidence index, which reported that sentiment improved more than forecast going into October.
EUR investors will look to a speech by European Central Bank (ECB) President Christine Lagarde for fresh impetus today. If she strikes a hawkish tone, the euro is likely to strengthen.
US dollar (USD) bolstered by upbeat data
The US dollar appreciated yesterday as US data surprised to the upside, prompting a trimming of Federal Reserve interest rate cut expectations.
This included an upwardly revised second-quarter GDP reading, a shock recovery in durable goods orders in August and an unexpected fall in new jobless claims last week.
The Fed’s preferred indicator for inflation, the core PCE price index, will be centre stage for USD investors today. Another uptick in inflation could further temper Fed rate cut bets and preserve the US dollar’s positive momentum.
Canadian dollar (CAD) buoyed by positive USD correlation
The Canadian dollar (CAD) trended higher on Thursday, with the currency’s positive trading relationship with the US dollar offsetting a softening of oil prices.
Canada’s latest GDP figures could provide additional support to the ‘loonie’ later today. If July’s recovery of growth accelerated into August, it will ease fears that Canada is at risk of slipping into a technical recession.
Data releases
08:00 NZD Consumer Confidence (Sep)
19:30 EUR ECB Lagarde Speech
22:30 CAD GDP (Aug)
22:30 USD Core PCE Price Index (Aug)