Australian Dollar
With domestic markets quiet thanks to the bank holiday the Australian Dollar lacked any particular direction at the start of the week. As the general sense of risk aversion was boosted by the latest bout of global political uncertainty the ‘Aussie’ came under pressure. However, the Australian Dollar also benefitted from the relative weakness of its antipodean cousin as New Zealand’s election failed to deliver a conclusive result.
This morning’s ANZ Roy Morgan weekly consumer confidence index could offer support to the ‘Aussie’, with any uptick in domestic optimism likely to bolster AUD exchange rates.
Sterling
Although hopes were not high as the latest round of Brexit negotiations got underway this was not enough to keep the Pound on a softer footing. While Moody’s decision to lower its UK credit rating ahead of the weekend dented the appeal of Sterling the downside potential of GBP exchange rates has eased. In the absence of any significant deterioration in relations between the UK and EU negotiating teams the Pound is thus likely to recover further ground.
An uptick in the latest BBA loans for house purchase figure may boost GBP exchange rates this evening.
Euro
Markets were ultimately disappointed by the results of the German election, even though Angela Merkel looks set for a fourth term in office. The significant gains made by the far right AfD party spooked investors, casting further uncertainty over the outlook of the Eurozone economy. Coupled with an unexpectedly weakened German IFO business sentiment survey this left the Euro on a sharp downtrend, undermining hopes of greater Eurozone integration.
While an increase in the German import price index could point towards rising inflationary pressure this is unlikely to be enough to shore up the single currency at this juncture.
US Dollar
The increasing sense of political uncertainty in the Eurozone, New Zealand and Japan all helped to bolster the appeal of the ‘Greenback’ on Monday. With risk appetite faltering the safe-haven US Dollar strengthened, even in the wake of a soft Chicago Fed national activity index. While the world’s largest economy is still showing some signs of weakness markets are continuing to bet on the prospect of the Federal Reserve raising interest rates imminently.
If tonight’s US consumer confidence index shows a fresh dip in domestic optimism this could dent the appeal of the US Dollar, though.
Canadian Dollar
Demand for the ‘Loonie’ strengthened as oil prices trended higher once again, boosted by the latest commentary from oil producers. As producers expressed confidence that the OPEC-led production limiting agreement is yielding results this gave investors fresh reason to pile into the commodity-correlated Canadian Dollar, even as risk appetite generally diminished.
However, as confidence in the oil outlook improves the Canadian Dollar could be vulnerable to a bout of profit-taking in the near future.
New Zealand Dollar
Saturday’s election failed to yield a decisive result, leaving the New Zealand Dollar to slump sharply once markets opened on Monday. With neither major party holding enough seats to form a government a sense of uncertainty looks set to dominate the domestic outlook in the days ahead. This is likely to give the Reserve Bank of New Zealand (RBNZ) more reason to sit on its hands this week, limiting the potential for a ‘Kiwi’ rally.
If the New Zealand trade balance is found to have returned to a state of deficit in August this could increase the downside pressure on NZD exchange rates.
Data Released
September 26th 07:45 NZD Trade Balance (AUG) -825 million
September 26th 09:30 AUD ANZ Roy Morgan Weekly Consumer Confidence Index
September 26th 16:00 EUR German Import Price Index (YoY) (AUG) 2.1%
September 26th 18:30 GBP BBA Loans for House Purchase (AUG) 41700
September 27th 00:00 USD Consumer Confidence (SEP) 120