Australian Dollar
Both the outcome of the US presidential election debate and the early US data released yesterday helped the Australian Dollar to trend bullishly. Although the result was perceived to be positive for the US Dollar, this only served to stabilise the outlook of the markets and give investors the confidence to chase after yield. US data was largely weak, while the Australian consumer confidence index showed a strong increase from 115.5 to 120.6.
The only development on the Australian economic calendar today will be a speech from the Reserve Bank of Australia’s (RBA) Malcolm Edey.
Sterling
While the AUD/GBP exchange rate was making gains yesterday, the extent of the ‘Aussie’s advance was significantly curbed during the afternoon of the European session. The Pound had started weak due to lingering Brexit fears – the prospect of a ‘hard’ Brexit, in which the UK abandons the single market altogether, continued to weigh on Sterling. But news that Liam Fox had been instructed not to signal this would happen in an upcoming speech suggested the government was unwilling to be seen backing such a strategy, helping improve sentiment amongst investors. By the end of the session, the Pound was clawing back losses as markets considered the sell-off overdone.
Nationwide house prices for September are due today. With experts having warned that the property market could be hit hard by the fallout from the Brexit vote, markets will be watching closely for any signs of weakness.
Euro
Concerns over the German banking sector were weighing on the Euro yesterday. The potential for Deutsche Bank to face a $14 billion fine from the US Department of Justice (DoJ) continued to worry the markets. Recent suggestions that Chancellor Angela Merkel had refused to provide state aid – despite the bank asserting it had not asked for help – worried onlookers. The fine is not much smaller than Deutsche Bank’s market valuation, so if the fine is not lowered the bank could collapse. This, according to some market experts, could trigger a shockwave so severe in the German banking sector that it causes the collapse of the Euro as well. Investors were therefore unsurprisingly selling out of the single currency.
In a light data day for the Eurozone, German consumer confidence is the only ecostat on the calendar and is predicted to hold steady at 10.2.
US Dollar
The presidential debate between Hillary Clinton and Donald Trump was perceived to have yielded a victory for the Democratic nominee. This eased market fears of a Trump victory in the November elections; the Republican’s economic policies have been roundly lambasted by many economists, therefore investors looking for stability are largely inclined to favour a Democratic victory. With investors more relaxed, they felt comfortable leaving the safety of the US Dollar and seeking out higher-risk assets in order to generate a stronger return on investment. This sell-off left the US Dollar weak. The latest US consumer confidence index strengthened Federal Reserve rate hike bets after defying forecasts of a drop from 101.8 to 99 to instead rise to 104.1.
Durable goods orders are expected to have fallen -1.5% in August, after posting bullish growth of 4.4% in July. This will likely weaken the outlook for the Federal Reserve’s December monetary policy meeting and therefore the US Dollar.
Canadian Dollar
The Canadian Dollar gradually weakened during yesterday’s session, despite the support generated by the global search for yield. Oil prices were on the decline again, with market hopes of an oil-producer agreement for action on the world’s oversupply of crude seemingly dashed again. Rumours that there were still too many differences between the wants of Saudi Arabia and Iran set WTI and Brent back on the decline, while the Iranian Oil Minister did suggest that November may see a deal finally being reached.
There is no Canadian data on the calendar today.
New Zealand Dollar
There was no New Zealand data released yesterday, but the New Zealand Dollar trended bullishly thanks to market sentiment. The outcome of the US presidential debate stoked appetite for the high-yielding ‘Kiwi’, which in the medium-term could cause problems for the Reserve Bank of New Zealand (RBNZ).
There is no New Zealand data on the calendar today.
Data Released
September 28th GBP Nationwide House Prices n.s.a. (YoY) (SEP)
September 28th 10.20 AUD RBA’s Edey Speech in Melbourne
September 28th 16.00 EUR German GfK Consumer Confidence Survey (OCT) 10.2
September 28th 22.30 USD Durable Goods Orders (AUG P) -1.5%