Australian Dollar Falters as Chinese Industrial Slowdown Continues
An unexpected weakening in August’s Chinese industrial production and retail sales data limited the appeal of the Australian Dollar at the start of the week. This latest sign of a slowdown within the Chinese economy encouraged a sense of market risk aversion, even as hopes of progress towards a fresh US-China trade agreement lingered. Escalating tensions in the Middle East also put a dampener on the risk-sensitive Australian Dollar in the wake of the drone attack on a Saudi oil facility.
Even so, AUD exchange rates could find a rallying point this morning if the latest set of Reserve Bank of Australia (RBA) meeting minutes show a limited degree of dovishness among investors.
Johnson’s Resistance to Brexit Extension Dents Pound
Confidence in the Pound faded as Boris Johnson maintained his resistance to requesting an extension to the current Brexit deadline. As a meeting with European Commission President Jean-Claude Juncker failed to yield any positive signs of progress on the key issues GBP exchange rates were left to trend lower across the board. With the matter of the Irish border remaining unresolved markets are still wary of the potential for the UK to crash out of the EU without a deal at the end of October.
This sense of political anxiety looks set to keep the Pound under pressure today.
Euro Under Pressure as ECB Eyes Further Action
As European Central Bank (ECB) policymakers maintained a divided view over monetary stimulus the appeal of the Euro remained limited. Comments from Philip Lane, the ECB’s chief economist, that the central bank is still committed to its inflation target suggest that further action is on the cards, however. This left the Euro on a weaker footing as investors speculated over the likelihood of monetary policy seeing a further adjustment before the end of the year.
An improvement in the German ZEW economic sentiment survey may offer a boost to the Euro, even though the index looks set to remain in negative territory.
Underwhelming Manufacturing Index Fails to Dent US Dollar
USD exchange rates shrugged off a disappointing Empire manufacturing index overnight as fears of a potential Middle Eastern conflict picked up. Even though the index dipped from 4 to 2 in September, highlighting a continued decline within the manufacturing sector, the US Dollar still made gains across the board. The general increase in market risk aversion helped to boost the US Dollar, in spite of this latest sign of domestic weakness.
Any improvement in August’s manufacturing production data may encourage further USD exchange rate gains.
Canadian Dollar Benefits from Oil Price Surge
As the attack on Saudi Arabia’s oil plants saw oil prices rocket higher the commodity-correlated Canadian Dollar benefitted. With the disruption reportedly knocking out 5% of the global oil supply Brent crude prices were driven to their single largest increase in history, gaining 20% at their peak. This move helped to boost CAD exchange rates, even as worries over the health of the global outlook persisted.
Another monthly contraction in manufacturing sales could dent some of the Canadian Dollar’s bullishness, however.
Solid Services PMI Fails to Shore up New Zealand Dollar
Another solid month of growth for the New Zealand service sector failed to keep NZD exchange rates on a stronger footing for long. The relative strength of the service sector was not enough to outweigh the recent decline in manufacturing, with concerns over the economic outlook remaining. Demand for the New Zealand Dollar also faltered in the face of escalating Middle Eastern tensions.
A decline in the third quarter Westpac consumer confidence index may expose NZD exchange rates to additional losses this morning.
Data Releases
September 17th 07:00 NZD Westpac Consumer Confidence (3Q) 102.5
September 17th 11:30 AUD Reserve Bank of Australia Meeting Minutes (SEP)
September 17th 19:00 EUR German ZEW Economic Sentiment Index (SEP) -38
September 17th 22:30 CAD Manufacturing Sales (MoM) (JUL) -0.3%
September 17th 23:15 USD Manufacturing Production (MoM) (AUG) 0.2%