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Risk Aversion Hits, with the EUR, GBP and Dollar all in Action Today

Bob Mason

Earlier in the Day:

The economic calendar was on the busier side through the Asian session this morning. Economic data included August business confidence figures out of New Zealand and 2nd quarter New CAPEX numbers out of Australia.

Outside of the numbers, the Asian market reacted further the Wednesday’s U.S Treasury yield curve inversion to levels last seen back in 2007.

For the Kiwi Dollar

The ANZ Business Confidence index fell from -44.3 to -52.3 in August, the lowest level since April 2008.

According to the latest ANZ Survey,

  • Firms’ expectations for their own activity over the year ahead, fell by 6 points to -1, its lowest level since April 2009.
  • Employment intentions fell by 3 points to -9, a net 9% of firms intending to reduce employment.
  • Investment intentions fell by 4 points to -4, while profit expectations fell by 4 points to a net 20% of firms expecting profits to decline. That’s the worst reading since mid-2009.
  • A net 41% of firms expect it to be tough to get credit.
  • Inflation expectations fell from 1.8% to 1.7%, its lowest since late 2016.
  • Export intentions fell by 2 points to -1, a net 1% of firms expecting exports to fall.

The Kiwi Dollar moved from $0.63380 to $0.63228 upon release of the figures. At the time of writing, the Kiwi Dollar was down by 0.43% to $0.6310.

For the Aussie Dollar

Private new capital expenditures fell by 0.5%, quarter-on-quarter, in the 2nd quarter, following a 1.7% fall from the 1st quarter. Economists had forecast a 0.5% rise.

According to the ABS,

  • Spending on buildings and structures fell by 3.3%, while spending on equipment, plant, and machinery rose by 2.5%.

The Aussie Dollar moved from $0.67358 to $0.67281 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.12% to $0.6726.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.24% to ¥105.87 against the U.S Dollar, with risk aversion driving providing support.

The Day Ahead:

For the EUR

It’s a busier day ahead on the economic calendar. Ahead of the European open, consumer spending and 2nd quarter GDP are due out of France.

Later this morning, Germany’s August unemployment change figures and unemployment rate are due out.

We expect consumer spending and unemployment change figures to have the greatest influence on the EUR.

Also of influence are prelim inflation figures out of Spain and Germany.

Outside of the stats, geopolitics will continue to provide direction through the day coupled with sentiment towards the economic outlook.

At the time of writing, the EUR was up by 0.05% to $1.1083. News of Italy avoiding a snap general election provided support early on.

For the Pound

It’s another quiet day ahead on the data front. There are no material stats due out of the UK to provide the Pound with direction.

The lack of stats will the markets to continue to fixate on events in Westminister. British PM Johnson stated on Wednesday that he had requested for the Queen to suspend Parliament from 10th September.

Pro-remainers had looked to block such a move in July and are now looking to speed up the case hearing that was scheduled for 6th September.

If the Scotland Court of Session rule against the pro-remainers, the chances of a no-deal Brexit will rise significantly, which is Pound negative.

At the time of writing, the Pound was down by 0.08% to $1.2202.

Across the Pond

It’s a busy day on the economic calendar. Key stats due out of the U.S include 2nd estimate GDP numbers for the 2nd quarter, July trade data, pending home sales and the weekly jobless claims figures.

Any downward revision to the GDP numbers would pressure the Greenback. We can also expect some market sensitivity to the trade figures.

Of less influence on the day will be pending home sales and the initial jobless claims figures.

Outside of the numbers, geopolitical risk will continue to drive the global financial markets. Any trade war chatter needs to be factored in on the day.

At the time of writing, the Dollar Spot Index was down by 0.02% to 98.193.

For the Loonie

It’s a quiet day ahead on the economic calendar. Economic data due out of Canada later today is limited to 2nd quarter current account data.

We expect the stats to have a muted impact on the Loonie, however.

Market sentiment towards the U.S – China trade war and the global economic outlook will continue to influence.

The Loonie was down by 0.08% at C$1.3316, against the U.S Dollar, at the time of writing.

This article was originally posted on FX Empire

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