Australian Dollar (AUD) Buoyed by Rate Cut in China
The Australian Dollar (AUD) rose at the beginning of the week as the Peoples Bank of China (PBoC) cut 1 and 5-year loan prime rates.
The move boosted Chinese stocks: strength in the Chinese economy subsequently supported the ‘Aussie’ given the currency’s role as a proxy. Furthermore, rallying prices across Australia’s main exports – coal and iron ore – lent AUD tailwinds.
Today’s PMI releases are expected to show both manufacturing and services activity expanded at a slower rate last month, potentially dampening AUD support.
New Zealand Dollar (NZD) Climbs Alongside AUD
The New Zealand Dollar (NZD) firmed on Monday, likely supported by strength in the ‘Aussie’ as well as economic strength in China.
Chinese tailwinds support NZD due to the countries’ close trading relationship. Furthermore, an uptick in the Chinese Yuan (CNY) buoys AUD, which invariably lends support to the ‘Kiwi’.
NZD may trade on risk sentiment today, given a lack of domestic data on the docket.
Pound (GBP) Pressured by Dire Economic Forecasts
The Pound (GBP) trended lower against several of its peers yesterday amid an increasingly dour outlook for the UK economy.
Economists are now forecast inflation will rise above 18% by the start of next year, adding to the financial strain may UK households are already under.
Today, an expected softening of the latest UK manufacturing and services PMIs could apply additional pressure to the Pound.
Euro (EUR) Drops Below Parity against USD
The Euro (EUR) lost support at the beginning of the week, falling below parity against the US Dollar (USD) as gas prices jumped.
The hike in gas prices was triggered by Russia’s announcement it will suspend its Nord Stream 1 pipeline for three days, apparently to conduct unscheduled maintenance.
PMI data from the Eurozone is expected to report another contraction of private sector growth in August, likely keeping the Euro on the back foot today.
US Dollar (USD) Firms Overall on Widespread Risk Aversion
The US Dollar (USD) trended broadly higher on Monday as a risk-off mood drew support toward the safe-haven currency.
Capping gains for the ‘Greenback’, however, were increasing fears of a recession. Markets are worried that aggressive interest rate hikes from the Federal Reserve bank could derail an already-weak global economy.
US PMIs are expected to print mixed today, with manufacturing activity falling in August while services output is expected to have climbed but remain in contraction territory.
Canadian Dollar (CAD) Slides as Oil Prices Drop
The Canadian Dollar (CAD) weakened against the majority of its peers yesterday as crude oil prices fell on reduced demand expectations and the prospect of increased supplies of Iranian oil.
Data Releases
Aug 23rd 09:00 AUD S&P Global Manufacturing PMI Flash (Aug) 55
Aug 23rd 09:00 AUD S&P Global Services PMI Flash (Aug) 51
Aug 23rd 18:00 EUR S&P Global Manufacturing PMI Flash (Aug) 49
Aug 23rd 18:00 EUR S&P Global Services PMI Flash (Aug) 50.5
Aug 23rd 18:00 GBP S&P Global/CIPS Manufacturing PMI Flash (Aug) 51.1
Aug 23rd 18:00 GBP S&P Global/CIPS UK Services PMI Flash (Aug) 52
Aug 23rd 23:45 USD S&P Global Manufacturing PMI Flash (Aug) 52
Aug 23rd 23:45 USD S&P Global Services PMI Flash (Aug) 49.2
Aug 24th 00:00 EUR Consumer Confidence Flash (Aug) -28