As the weekend passed without any escalation in the tensions surrounding North Korea this encouraged a resurgence in market risk appetite. With investors piling back into higher-yielding assets once again this offered the Australian Dollar some degree of support, even in the absence of any fresh domestic data. However, the ‘Aussie’ failed to make gains across the board thanks to persistent worries over the underlying health of the Australian economy.
The mood towards the Australian Dollar could improve more significantly if the NAB business confidence index for August points towards a greater level of domestic optimism.
Brexit-based jitters weighed on the Pound once again as MPs prepared to vote on the repeal bill that will begin the process of incorporating EU law into the UK law books. While Labour signalled its intention to vote against the bill – which it is feared would hand too much power to government ministers – the chances of a defeat still remained fairly slim. This limited the downside pressure on Sterling, particularly as markets began to brace for this evening’s UK consumer price index report.
If August’s inflation data fails to show an uptick, though, this is likely to provoke a fresh slump for GBP exchange rates as hope for any imminent Bank of England (BoE) interest rate hike fades.
The latest commentary from European Central Bank (ECB) Executive Board member Benoît Cœuré dented the appeal of the Euro yesterday. Markets were not impressed by the relatively dovish nature of the policymaker’s comments, which suggested that monetary policy is likely to remain accommodative for longer. Cœuré’s warning over the negative impact of the Euro’s relative strength also put pressure on EUR exchange rates, particularly as market risk appetite picked back up.
Should ECB policymakers continue to adopt a more cautious view on monetary policy the mood towards the single currency could remain rather muted.
With the damage from Hurricane Irma thought to be less severe than initially predicted the US Dollar was encouraged to trend higher against many of the majors. As the economic impact of the storm is likely to be less costly than feared confidence in the outlook of the US economy naturally improved. Although there is still speculation over the likelihood of the Federal Reserve raising interest rates again before the end of the year this was not enough to weigh down the ‘Greenback’ overnight.
Forecasts point towards a modest dip in August’s NFIB small business optimism index which could diminish the appeal of the US Dollar somewhat this evening.
An unexpected uptick in Canadian housing starts on the month offered further support to CAD exchange rates. This latest signal of the underlying strength of the domestic economy gave investors continued cause for confidence in the Canadian Dollar, indicating that the Bank of Canada (BOC) is likely to maintain its hawkish outlook. While oil prices came under renewed pressure, even as global tensions eased somewhat, the ‘Loonie’ was still able to make gains across the board.
This bullishness may prove to be short-lived, however, as the encouragement for the Canadian Dollar is likely to be generally lacking over the course of the day.
As New Zealand card spending rebounded from -0.6% to 0.6% on the month in August this shored up the ‘Kiwi’ once again. Signs that domestic consumers are in an increasingly positive mood were naturally greeted, allowing NZD exchange rates to strengthen. With the general sense of risk appetite recovering somewhat at the start of the week there was little to prevent the New Zealand Dollar from holding onto its stronger footing.
If the latest ANZ truckometer reading points towards an increase in domestic inflationary pressure the ‘Kiwi’ could extend its gains further.
September 12th 08:00 NZD ANZ Truckometer (MoM) (AUG)
September 12th 11:30 AUD NAB Business Confidence (AUG)
September 12th 18:30 GBP Consumer Confidence Index (YoY) (AUG) 2.8%
September 12th 20:00 USD NFIB Small Business Optimism (AUG) 105
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