Will Pound Sterling (GBP) Exchange Rates Hold Higher Levels Heading into the Weekend?
Pound Sterling (GBP) largely held recent gains against the Euro (EUR) and US Dollar (USD) on Thursday despite the fact that investors were left less-than-impressed by July’s UK net consumer credit and mortgage approvals figures, which both fell short of forecast.
Consumer borrowing slowed to its weakest level since November 2015, suggesting that households are likely to rein in their spending further in the months ahead, potentially limiting domestic growth.
If all stays quiet on the Brexit front we may not see much GBP movement before the weekend, although today’s run of Eurozone data could spark some volatility for GBP/EUR.
Next week the data calendar is looking a bit fuller, with UK construction, manufacturing and services PMIs due for release.
If it looks like the UK economy struggled to pick up momentum in August the Pound could return to its August lows.
Euro (EUR) Exchange Rates Fail to be Lifted by German Inflation Data
While the German consumer price index held steady on the year in August this was not enough to boost the single currency yesterday.
Although the headline annual inflation rate remains strong, the monthly measure eased to just 0.1%. This suggests that price pressures in the Eurozone’s powerhouse economy are still limited, keeping the Euro on the back foot. A weakening in the Eurozone economic confidence index also put EUR exchange rates under pressure, denting optimism in the economic outlook of the currency union.
That being said, if the Eurozone inflation measure remains above the European Central Bank’s (ECB) 2% target the Euro could find renewed support today.
US Dollar (USD) Exchange Rates Sturdy before Confidence Data
The expected uptick in the US personal consumption expenditure core encouraged the US Dollar to push higher across the board on Thursday. As price pressures within the US economy remain elevated the odds of further Federal Reserve policy tightening picked back up. Generally positive jobless claims data gave USD exchange rates additional cause for confidence, pointing towards the continued tightening of the US labour market.
However, a dip in the Chicago purchasing manager index or the University of Michigan sentiment measure may put a dent in demand for the US Dollar as confidence in the economic outlook remains fragile.
Canadian Dollar (CAD) Pressured Lower by Disappointing Growth Data
As the US and Canada remain locked in trade talks, hopes for the NAFTA-replacement agreement diminished on Thursday. Confidence in the Canadian Dollar was also dented by June’s Canadian gross domestic product data, which fell short of forecasts on the month. Although the annual growth rate remained solid, investors were more concerned by the unexpected stagnation on the month, raising concerns over the underlying health of the domestic economy.
A solid reading from July’s producer price index data could offer CAD exchange rates a rallying point before the weekend, although the primary focus of markets is likely to remain on US-Canada trade negotiations.
RBA Speculation Leaves Australian Dollar (AUD) Struggling
As markets continued to reassess the odds of the Reserve Bank of Australia (RBA) raising interest rates in the coming months the Australian Dollar (AUD) was left on a weaker footing. The mood of AUD exchange rates soured further on Thursday in response to July’s building approvals data, which showed sharper-than-expected contractions on both the month and the year. A sizable decline in second quarter private capital expenditure also put pressure on the Australian Dollar, suggesting that domestic confidence is declining.
Next week’s Australian growth data could inspire significant AUD exchange rate movement.
New Zealand Dollar (NZD) Weaker on Concerns for Domestic Economy
While the ANZ activity outlook index held steady on the month in August, this failed to bolster the appeal of the New Zealand Dollar.
NZD exchange rates were instead undermined by a continued decline in the ANZ business confidence index which fell from -44.9 to -50.3. The gloomy nature of the business outlook does not bode well for the health of the New Zealand economy, leaving the ‘Kiwi’ to trend lower against its rivals.