Aussie Dollar still slipping on covid concerns

There is a fair amount of déjà vu in this morning’s rate chart. Most of the market is in stasis, lacking compelling reasons to shift. This week will change that though.

One currency that has moved is the Australian Dollar, which continues to lose ground as further lockdowns are imposed across Australia and it looks like Sydney will be quarantined for 5 more weeks. The GBPUSD exchange rate is pushing AUD 1.89 this morning; a level we haven’t seen for 15 months. Australia’s manufacturing purchasing managers index (PMI) was a little down on last month but still a respectable 56.9 on an index, where anything above 50 points to growth. That positivity was offset by a 0.5% drop in job adverts. The Reserve Bank of Australia will announce their interest rates and monetary policy tonight. No one expects the base rate to change but clues to early rate hikes will be seized upon – if they happen. If that boosts the Aussie Dollar, be ready for Wednesday’s Australian retail sales data, which is likely to be bad.

Chinese manufacturing recovery cools

China’s Caixin manufacturing PMI was published overnight. That fell to 50.3; barely in the growth zone, the poorest in 15 months and well below market forecasts. This calming of the Chinese recovery is a little unsettling for the markets that service the behemoth Chinese economy.

PMIs fill the skies

We will get a slew of manufacturing sector PMIs today, including the UK and US ones plus a few from Eu member states. None of the forecasts suggest contraction in the manufacturing sectors of these economies and some look very promising indeed. The overnight releases from the Asian markets suggest covid and rising costs damaged manufacturing sentiment. Foer example, the likes of Malaysia, Indonesia and Vietnam were in the negative zone.

The Sterling – Euro rate is trapped just below €1.1760, which might seem an odd number but, on the reciprocal, that equates to one Euro buying 85 pence. Other than a couple of days of excitement in April, this ceiling has capped the GBPEUR rate since April 2020. The pent-up potential is substantial, so a break of EUR 1.18, ought to unleash plenty of Euro selling. Quite what the catalysts will be for such a move is hard to predict but further unlocking of the UK economy could be the key.

Thursday brings us the Bank of England’s ruminations on the economy and their interest rate decision. No change will be made but target dates and rates will help traders set their expectations for Sterling. So expect a bit of GBP volatility on the day.

And Friday brings US employment data. The weekly jobless claims numbers have been a little erratic of late, so the monthly data will be very interesting and could catch the markets by surprise. The GBPUSD rate is still pressing $1.39 but not managing to get above that ceiling. There are plenty of potential upsets this week that could aid and abet a breakout above that level.

Friday will also bring Canada’s employment data. GBPCAD is C$1.7360this morning and the upward trend we saw in July looks like it has run out of steam for now, so there is a chance we will see the C$1.7250 support tested.

And today we ought to sing Happy Birthday to time. It was on this day in 1880 that the British Parliament officially adopted Greenwich Mean time. I’ll see if I can find 141 candles in the man drawer. They grow up so fast don’t they.

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