Sharp Quarterly Growth Contraction Fuels Australian Dollar Selling
The Australian Dollar suffered losses after the second quarter Australian GDP fell short of expectations, clocking in at -7% to deliver the country’s worst quarterly growth decline on record.
Following on the heels of the -0.3% contraction seen in the first quarter, this pushed Australia into a state of technical recession for the first time in 29 years. As a result, the mood towards the Australian Dollar largely soured yesterday, with confidence in the economic outlook dropping.
With the trade surplus looking set to narrow for July, the Australian Dollar is likely to remain under pressure this morning.
Pound Fails to Capitalise on UK House Price Rise
A sharp monthly increase in UK housing prices was not enough to keep the Pound on a bullish run during yesterday’s session. While prices saw an unexpectedly strong 2% increase on the month in August, this failed to spark any fresh support for GBP exchange rates.
With the resurgence in the housing market largely attributable to the recently announced stamp duty holiday investors saw limited cause for confidence in the wider economic outlook here.
Even so, confirmation this afternoon that the UK service sector saw a solid expansion in August could still offer the Pound a boost.
Softer German Retail Sales Limit Euro Appeal
German retail sales saw another monthly decline in July, highlighting the underwhelming performance of the Eurozone’s powerhouse economy. The Euro came under renewed pressure against its rivals as the impact of the Covid-19 pandemic continued to drag on economic activity.
Markets were further spooked by the latest Spanish unemployment figures, which saw the jobless rate spiralling higher once again as the country’s youth employment crisis deepened, hitting 45%.
As investors expect to see a lacklustre performance from August’s finalised Eurozone services PMI, the single currency may shed further ground over the course of the day.
US Dollar Rallies in Spite of Underwhelming Jobs Report
August’s ADP employment report proved weaker than anticipated, showing only a 428,000 increase in jobs rather than the 950,000 forecast.
This allowed the US Dollar to recover some ground overnight, although this does not bode well for the strength of the upcoming non-farm payrolls report. With the impact of the Federal Reserve’s softer inflation outlook fading and Covid-19 concerns lingering, USD exchange rates returned to an uptrend.
If the US trade deficit widens as anticipated, though, the US Dollar may struggle to hold onto a positive footing tonight.
Jump in Labour Productivity Supports Canadian Dollar
Canadian labour productivity saw unprecedented growth in the second quarter, swelling 9.8% as the decline in hours worked outstripped a fall in business output.
While this sharp jump is not entirely good news for the economy, given that it was driven purely by a decline in output, this still gave the Canadian Dollar a leg up.
The publication of Canada’s Balance of trade could give CAD exchange rates an additional boost overnight if the trade deficit narrowed in July.
New Zealand Dollar Benefits from RBNZ’s Willingness to Ease
Comments from Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr lifted the New Zealand Dollar against its rivals during yesterday’s session.
As Orr signalled a willingness to implement further monetary policy tools if necessary, NZD exchange rates pushed higher on the possibility of fresh loosening. Meanwhile, an uptick in the second quarter terms of trade index also lent support to the antipodean currency, in spite of a wider sense of market anxiety.
This sense of bullishness may prove short-lived, though, in the absence of further domestic data as Covid-19 worries linger.
Data Releases
September 3rd 11:30 AUD Balance of Trade (JUL) 5.4 billion
September 3rd 18:00 EUR Eurozone Services PMI (AUG F) 50.1
September 3rd 18:30 GBP Services PMI (AUG F) 60.1
September 3rd 22:30 CAD Balance of Trade (JUL) -2.5 billion
September 3rd 22:30 USD Balance of Trade (JUL) -58 billion