Daily Currency Update
After yesterday’s British economic docket saw a complete absence of data to provoke volatility, the Pound edged lower versus its major peers in response to dovish Bank of England (BoE) rate hike expectations. With a lack of inflationary pressure and China’s slowing economy weighing on policymaker confidence, many futures traders are now betting that the BoE will delay a benchmark interest rate hike until mid-2016. Tuesday’s European session will see the publication of UK Mortgage Approvals, Net Consumer Credit and Net Lending securities on Dwellings which will be likely to provoke Sterling volatility.
Upon the news that other car manufacturers are now being investigated, since Volkswagen was found to have cheated US emissions tests, demand for the Euro flattened considerably. Should it emerge that other car companies did in fact follow suit, Germany’s automotive industry will be hard-hit. Serious economic issues in the currency bloc’s most influential nation will be detrimental for the Eurozone as a whole. Later on Tuesday afternoon will see German inflation data published. Given that German import prices contracted beyond expectations, inflation in the region is likely to remain close to negative territory.
In addition to several influential domestic data publications, the US Dollar saw movement during Monday’s North American session in response to speeches from Federal Reserve officials. The US asset is trending lower on Tuesday morning after yesterday’s speeches only heightened trader confusion with regards to the Fed’s policy outlook. Chicago Federal Reserve President Charles Evans stated that a delay to monetary policy would be necessary to prepare for inflation headwinds next year. In contrast, New York Fed President William Dudley stated that a near-term rate hike was appropriate and policymakers may even vote for a hike in October. Later today, US Consumer Confidence has the potential to provoke US Dollar movement.
After the Shanghai Composite Index ended the Asian session just over 2.0% down, demand for the high-yielding Australian Dollar suffered. Additional ‘Aussie’ (AUD) headwinds can be linked to weak gold prices and domestic data which showed weekly consumer confidence dropped significantly. Given that market sentiment remains damp amid so many uncertainties regarding the VW Scandal, China and Fed policy outlook, the Australian asset is likely to see a continued lack of demand throughout Tuesday’s European session.
New Zealand Dollar
Unlike its South Pacific neighbour, the New Zealand Dollar strengthened versus many of its peers on Tuesday morning. The appreciation can be attributed to rising dairy prices after Fonterra increased its farm gate milk price. During the Australasian session New Zealand’s Building Permits data may provoke ‘Kiwi’ (NZD) changes.
Crude futures remain disappointing as Asian cues point towards continued damp demand from the world’s second-largest economy. Crude prices found some short-term support after an estimated drawdown of over 1 million barrels last week from the Cushing, Oklahoma delivery hub for US crude. The Canadian Dollar softened versus many of its currency competitors on Tuesday morning as poor oil price futures and damp market sentiment weighed on ‘Loonie’ (CAD) demand.
South African Rand
After plunging significantly versus its currency rivals during Monday’s European session, the South African Rand is holding a weak position on Tuesday morning. With gold and platinum prices continuing to fall and the mining sector looking particularly vulnerable against the back-drop of slowing demand from China, the Rand is likely to continue trending lower against its peers.