China manufacturing slows but Japan bounces back
That poor set of data from China that we reported on yesterday continued to move exchange rates throughout the day. As China is such a huge consumer of raw materials, any slowdown in their economy shows up in weakened currencies of the commodity-exporting nations. So the Aussie Dollar, New Zealand Dollar and Canadian Dollar are all cheaper this morning. GBPNZD is pushing above NZD 1.99, GBPCAD is above CAD 1.74 again.
RBA “Covid interrupted recovery” in Australia
GBPAUD is back up above AUD 1.89 but that has also been weakened by the minutes from the last Reserve Bank of Australia meeting. The RBA commented that the pandemic ‘interrupted the recovery’ in Australia and made it plain that they were ready to act if the crisis deepened. A central bank that is ready to act in that way will generally weaken its base currency. It is a boost to exporters because it makes Aussie goods a little more affordable to overseas buyers.
UK unemployment rate down to 4.7%
On the other side of each of those exchange rates is the British Pound which is having a mixed morning after very UK solid employment and earnings data. The UK unemployment rate is down to 4.7%; the same as June and a reversal of last month’s surprise uptick. 95,000 more people are in work, 20,000 more than forecast and average earnings were up 8.8% on the year. That’s the highest on the recent data set which is 10 years old. So, whilst GBPEUR is holding its ground in the mid-EUR 1.17 range, the GBPUSD rate is sliding back to $1.38. Sterling did find buyers there on Friday but we can’t be certain that will happen again.
There is a lot of US data today, so the USD will be volatile. Very briefly, housing data, retail sales, retail inventories, industrial production and then throw in a speech from the Federal Reserve Chairman just as the cherry on top.
Eurozone GDP awaited
This morning brings us Eurozone economic growth data for the second quarter of the year. 13.7% growth on the year is the forecast. Anything more will give the euro a boost and anything less will do the opposite. The effect will be muted though because trying to make a comparison between lockdown 2020 to recovery 2021 is like comparing bananas and elephants.
And be very grateful for this day in 1891. For that was the day that the electric starter for automobiles was patented. Otherwise, we’d all be hand-cranking cars and kick-starting motorbikes until this day. Phew.