RBA Statement Fails to Inspire Australian Dollar Confidence
The Reserve Bank of Australia’s (RBA) latest statement on monetary policy failed to offer the Australian Dollar much support ahead of the weekend. As the central bank reduced its growth forecast and indicated that wage growth is likely to remain lacklustre for some time to come investors saw little cause for optimism. Markets remain wary of the potential for another interest rate cut, given the Reserve Bank of New Zealand’s (RBNZ) recent move, limiting the strength of AUD exchange rates.
Unless there are signs of positive progress on trade between the US and China the Australian Dollar looks set to remain on a softer footing.
Unexpected Growth Contraction Pulls Down Pound
Confidence in the underlying health of the UK economy continued to deteriorate as the second quarter gross domestic product fell short of forecast. News that the economy had contracted -0.2% on the quarter saw the Pound trending sharply lower across the board as fears of a potential recession mounted. Increasing speculation that a snap general election is on the cards also left GBP exchange rates lacking in support.
Political developments look set to provoke further volatility for the Pound in the days ahead as anxiety over Brexit persists.
Narrowed German Trade Surplus Weighs on Euro
Demand for the Euro weakened in response to June’s German trade data, which saw the surplus narrow further than forecast. A fresh monthly decline in export volumes saw the surplus narrow from 20.6 billion to 16.8 billion on the month, reflecting the wider slowdown in global trade. With trade tensions only looking likely to escalate in the coming weeks this weakness dented the appeal of the single currency.
Ahead of Tuesday’s release of the latest ZEW economic sentiment surveys EUR exchange rates may struggle to find any particular upside.
Disappointing Producer Price Index Dampens US Dollar Demand
An unexpected contraction in July’s core producer price index saw the US Dollar shed some ground. The decline suggests that inflationary pressure within the US economy is not as strong as previously forecast, increasing the risk of future Federal Reserve dovishness. Even so, with the US-China trade dispute still casting a shadow over the global economic outlook a sense of risk aversion limited the downside potential of USD exchange rates.
Tomorrow’s US monthly budget statement could see the US Dollar trending lower across the board if it shows a widened deficit, however.
Canadian Dollar Upside Limited by Surprise Unemployment Uptick
The Canadian labour market unexpectedly loosened in July, leading the unemployment rate to rise from 5.5% to 5.7%. As this increase defied expectations of a modest uptick in employment the mood towards the Canadian Dollar naturally soured. However, the negative impact of the job data ultimately proved short-lived thanks to a surge in the accompanying hourly wage rate figure. With wage growth accelerating sharply on the year CAD exchange rates found a foothold.
Even so, support for the Canadian Dollar could well fade in the face of ongoing global trade tensions.
Rebound in Economic Activity Boosts New Zealand Dollar
NZD exchange rates continued to recover ground as the impact of the Reserve Bank of New Zealand’s (RBNZ) dovish policy decision tailed off. A solid rebound from July’s ANZ truckometer offered additional support to the New Zealand Dollar, suggesting a stronger level of economic activity. This encouraged investors to buy back into the New Zealand Dollar ahead of the weekend, even though confidence in the domestic economy remains muted.
An uptick in July’s retail card spending could bolster NZD exchange rates this morning, limiting the impact of wider market jitters.
Data Releases
August 12th 08:45 NZD Retail Card Spending (MoM) (JUL) 0.6%