Daily Currency Update
Sterling fluctuated on Monday as investors responded to hawkish comments from Bank of England (BoE) officials and the election of Jeremy Corbyn as Labour leader. The currency failed to exert itself beyond technical resistance against the US Dollar and remained trading in the 1.36 range against the Euro. Pound volatility is likely to occur this morning as the UK publishes its latest inflation numbers. The nation's consumer price index is believed to have fallen from 0.1% on the year in July to 0.0%, a result which may weigh on BoE rate hike expectations and the Pound. A surprising result is likely to inspire GBP to EUR, USD fluctuations.
Although Monday's Industrial Production data for the Eurozone printed well above forecast levels, the fact that the data was compiled before 'Black Monday' and the crash of China's equity markets meant that the report had little positive impact on the Euro. Today's German ZEW economic sentiment survey for September is forecast to decline and a marked dip in confidence is liable to weigh on demand for the common currency.
A quiet news day left the US Dollar trending in a fairly narrow range against most of its peers at the beginning of the week. However, with the Federal Open Market Committee (FOMC) interest rate decision looming, today's US reports will be of even greater interest than usual. If the pace of retail sales growth slows as predicted, it would further lessen the odds of the Fed adjusting interest rates this week – a US Dollar- negative outcome. Other US reports to focus on include the nation's Industrial/Manufacturing Production numbers and Business Inventories data.
The big news out of Australia yesterday was that former Cabinet Minister Malcolm Turnbull ousted Tony Abbott as Prime Minister. As investors hope Turnbull will have greater success than Abbott in bolstering domestic growth, the political shakeup left the Australian Dollar trending higher. The 'Aussie' went on to shed some of these gains however as the minutes from the Reserve Bank of Australia's (RBA) last policy meeting highlighted the situation in China and the impact the slowdown is likely to have on global growth. Australian New Motor Vehicle Sales were also shown to have fallen by -1.6% on the month in August.
New Zealand Dollar
Hopes that this week's Global Dairy Trade auction will show another increase in dairy prices lent the New Zealand Dollar support at the beginning of the week. Although the 'Kiwi' has since given up some of its earlier gains against the Pound, the NZD/GBP pairing could storm higher if the UK's Consumer Price Index shows the decline in annual inflation forecast by economists. An impressive dairy auction would also bolster New Zealand Dollar trading.
Sliding crude oil prices left the Canadian Dollar struggling against its most traded currency counterparts as the week began. While today's Canadian Existing Home Sales report could have an impact on the 'Loonie', investors will also be looking to Thursday's Federal Open Market Committee (FOMC) interest rate announcement for guidance. A dovish tone from the Fed and the prospect of US interest rates remaining lower for longer could see the Canadian Dollar recoup some of its recent losses.
South African Rand
The Rand was trending in a fairly narrow range against the US Dollar as markets braced themselves ahead of Thursday's hotly anticipated FOMC announcement. Today's South African current account data could have a modest impact on the Rand, but the US Retail Sales/Industrial Production/Manufacturing Production numbers may prove more influential.