Sterling
Wednesday’s developments were still weighing on Pound Sterling yesterday, with a NIESR GDP report and comments from Mark Carney souring market sentiment. The National Institute for Economic and Social Research warned that the UK still faced strong risks of entering a recession, potentially before the end of 2017. The Bank of England (BoE) Governor had stated that monetary stimulus remained necessary despite the bullish post-referendum recovery shown by the latest UK data.
Today’s domestic trade data has disappointed forecasts. June’s deficits have been revised higher, with both the goods balance and the non-EU balance shortfalls being raised by around -£0.5 billion. July’s deficits have not narrowed in line with expectations, with the total trade balance printing at -£4502 million instead of improving from -£5573 million to -£4200 as predicted.
Euro
Markets responded positively yesterday after the European Central Bank (ECB) made no changes to policy at all during its latest meeting. Commentators had been expecting adjustments to quantitative easing, but the programme was left untouched. What little news there was – that interest rates would stay low for some time to come – was barely news at all, considering nobody had expected otherwise. However, a surprisingly dull press conference with Mario Draghi, in which the ECB President failed to rock the boat as he usually does, caused the Euro to trend bullishly.
The Euro remains in positive territory today, albeit softened by weak German trade data, as markets await the outcome of talks regarding the next tranche of Greek bailout funding.
US Dollar
Negative correlation between the US Dollar and the bullish Euro saw the ‘Greenback’ remain soft yesterday despite a number of positive developments. Two Federal Reserve officials made hawkish observations on the state of the US economy, with Jeffery Lacker claiming there was a strong case to hike rates in September and Esther George speculating that the labour market may already be at full strength. Jobless claims data was supportive as well, with initial jobless claims surprisingly falling and continuing claims dropping further-than-expected.
The Fed’s Eric Rosengren will be delivering an economic forecast later today.
Canadian Dollar
The Canadian Dollar softened verses the majority of its peers yesterday as profit-taking following Wednesday’s Bank of Canada (BOC) decision ensued. Creating headwinds for the ‘Loonie’ was a large fall in the Ivey purchasing managers index to 52.3, instead of weakening just -0.5 points to 56.5. Elsewhere, the head of the Royal Bank of Canada (RBC) warned that the Canadian economy was in need of reinventing following the damage to the services and manufacturing sectors in the wake of the financial crisis. The process could take over a decade, he speculated.
Key unemployment figures are due out later today and are expected to show that 14,000 new jobs were created, although the unemployment rate is forecast to creep up to 7%.
Australian Dollar
Trade data boosted Australian Dollar exchange rates yesterday. On a domestic front, the trade deficit narrowed markedly, clocking in nearly -300 million below the -2700 million shortfall predicted after July’s -3250 million. Chinese data was supportive as well, with imports posting surprise growth of 1.5% in August; a slowing in the rate of decline from -12.5% to -5.7% had been forecast.
Today’s relevant data has already been released and has softened the Australian Dollar. The Chinese consumer price index fell further-than-expected from 1.8% to 1.3%, while home loans also surprised to the downside, contracting -4.2% instead of posting the consensus decline of -1.5%.
New Zealand Dollar
With no domestic data to provide support and the New Zealand Dollar still high from the previous day, traders indulged in profit-taking yesterday. As a result the ‘Kiwi’ weakened. The New Zealand Dollar has started the session today still in negative territory due to the fact that card spending figures showed a decline in consumer activity.
Retail spending fell -0.4% and the previous month’s growth was revised down to 0.2%. A hold at 0.3% had been predicted.
Data Released
12.45 USD Fed’s Rosengren to Deliver Economic Forecast
13.30 CAD Unemployment Rate (AUG) 7.0%
13.30 CAD Net Change in Employment (AUG) 14k