Improving US-China Trade Relations Boost Australian Dollar
As the US also appeared to be rowing back on some of its belligerence towards China ahead of next month’s trade talks market risk appetite naturally improved. This offered a boost to the Australian Dollar yesterday, even though September’s consumer inflation expectation report proved underwhelming. With expectations easing from 3.5% to 3.1% confidence in the inflationary outlook diminished, fuelling speculation that the Reserve Bank of Australia (RBA) could return to an easing bias.
Provided that trade optimism persists, however, AUD exchange rates may hold onto a positive footing heading into the weekend.
Lack of Brexit Certainty Keeps Pound Under Pressure
Demand for the Pound remained generally limited in the face of the latest bout of market uncertainty over Brexit. As markets await the supreme court verdict on Boris Johnson’s prorogation of parliament support for GBP exchange rates proved lacking. Investors remain wary of the potential for fresh political unrest, even though Johnson reportedly expressed confidence in getting a deal by mid-October.
Without the release of fresh UK data the Pound may struggle to find any upward momentum today.
Euro Bounces Back in Spite of ECB Action
Although the European Central Bank’s (ECB) decision to loosen monetary policy was widely expected it still saw the Euro trending sharply lower last night. Even so, the ECB’s move to cut its deposit rate to a fresh record low and restart its quantitative easing programme failed to drag on the single currency for long. As the policy changes were ultimately not as severe as initially thought EUR exchange rates soon recovered their losses.
A narrowed Eurozone trade surplus could drag the Euro down once again, though.
Underwhelming Inflation Signal Limits US Dollar Demand
In spite of the positive nature of the most recent US producer price index figures last night’s consumer price index report fell short of forecast. The headline consumer price index saw a surprise decline from 1.8% to 1.7%, suggesting that inflationary pressure within the US is not as solid as previously thought. With the Federal Reserve coming under fire once again from the White House the odds of an imminent interest rate cut picked up.
If August’s advance retail sales data shows weakening consumer sentiment this could dampen the appeal of the US Dollar further.
House Price Decline Weighs on Canadian Dollar
The Canadian Dollar fell off its positive footing as July’s new housing price index data proved disappointing. A -0.4% contraction in prices on the year suggests that the Canadian housing market is not as strong as investors would like, exposing CAD exchange rates to selling pressure. This weak showing undermined confidence in the outlook of the wider economy, dampening the appeal of the Canadian Dollar overnight.
Even so, as long as OPEC appears on track to introduce a fresh curb on its oil production the commodity-correlated CAD could benefit.
New Zealand Dollar Benefits from Food Price Index
The general sense of market trade optimism continued to benefit the New Zealand Dollar on Thursday. While the monthly food price index eased from 1.1% to 0.7% this failed to drag down NZD exchange rates, largely thanks to the more encouraging annual index. As inflationary pressure within the New Zealand economy showed fresh signs of building this offered support to the New Zealand Dollar.
Another underwhelming performance from the manufacturing PMI, though, may prompt NZD exchange rates to shed ground.
Data Releases
September 13th 08:30 NZD Manufacturing PMI (AUG) 46.9
September 13th 19:00 EUR Eurozone Trade Balance (JUL) 17.4 billion
September 13th 22:30 USD Advance Retail Sales (MoM) (AUG) 0.2%