It was a quiet session yesterday as the United States were off celebrating Labour day. In a lacklustre session most currencies were range bound and we await more clues to dictate near term direction. Overnight disappointing data from Australia has weakened the Australian dollar. The NAB business confidence index fell to 1 In august from 4 in July. The employment index also remained in negative territory which would suggest that the job market is failing to gather momentum. Falling Chinese imports confirming the slowdown in the Chinese economy , has also hit commodity currencies . Trade numbers out of China this morning showing that imports fell by a more than expected 13.8% and exports by 5.5% will add to concerns about growth in China and I would expect this to continue as policy makers struggle to stoke the faltering economy.
Sterling has gained some ground over this morning despite weaker than expected retail sales data overnight. The BRC reported that sales were 0.1% lower than a year ago a marked slowdown from July's 2.2% growth. Analysts have put this down to the timing of the bank holiday this year and expect volumes to increase in September. The strength in Sterling is difficult to fathom but perhaps traders are squaring up positions ahead of Thursdays rate setting meeting and the risks of a slightly more hawkish vote from the 8-1 that is expected.
The data calendar is light again today with only second tier US data released this afternoon. Minneapolis Fed Chief Kocherlakota is due to speak later today. He is a known dove and is likely to relay the same message. It seems likely that we will have to wait until tomorrow when we have a full slate of data and interest rate announcements form the Reserve Bank of New Zealand and the Bank of Canada before we see any volatility. For now I would expect the current ranges to remain in place.