Australian Dollar
Strong US data saw bets of an interest rate hike from the Federal Reserve in December rise sharply, cooling risk appetite and weakening the Australian Dollar. Domestic data was thin on the ground, with a solid rise in the number of job vacancies advertised doing little to provide support for the ‘Aussie’. Also weighing on the Australian Dollar was the news that an AU$5 billion fund to help develop infrastructure in Queensland and the Northern Territory has received just one application and is yet to hand out any cash, despite being in operation for three months.
Private sector credit figures are due for release today, but with high profile data from overseas also on the calendar, Australia’s domestic reports may be largely overlooked.
Sterling
Despite being in a position of weakness yesterday, the Australian Dollar to Pound Sterling exchange rate managed to claw minor gains. Brexit woes continued weighing on the UK currency. Italian Prime Minister Matteo Renzi criticised former Prime Minister David Cameron for dangling the carrot of a referendum in an attempt to solve problems within his party. He also stated that the UK would not be able to negotiate better rights for its citizens than residents of other countries outside of the Union currently enjoy. The head of an influential German trade body claimed there was growing ‘ill will’ towards the UK in Europe and that the EU was neither willing nor able to grant access to the single market without the UK accepting freedom of movement in return.
Strong consumer credit figures could support the Pound in the near-term as they indicate that the Bank of England’s (BoE) monetary stimulus measures are having an effect, lessening the odds that further easing will be required.
AUD/GBP could fall if the September iteration of the GfK consumer confidence survey shows negative sentiment lifted from -7 to -5 this month as forecast.
Euro
The Euro was largely on the rise yesterday, buoyed by strong German data. Unemployment remained at 6.1% – its lowest level since Reunification – and investors were unperturbed by the 1k increase in joblessness, which confounded forecasts of a -5k drop. Inflation data proved even better, with the consumer price index registering surprise 0.1% growth on the month and accelerating on the year from 0.4% to an above-forecast 0.7%. This suggests the European Central Bank’s (ECB) stimulus measures may finally be having a noticeable impact. This would be fortunate considering the rife speculation that the central bank is nearing the limits of certain policy measures.
Eurozone consumer price data is, like today’s German CPI, expected to show an accelerating pace of inflation. If the data meets forecasts then the Euro could trend bullishly on the improved inflation outlook for the currency bloc.
US Dollar
Strong US data delivered a significant boost to market expectations of a December rate hike, pushing the US Dollar higher. The third round of second-quarter GDP estimates saw the rate of expansion revised up from 1.1% to 1.4% – ten basis points higher than expected. Jobless claims figures also proved supportive and the advance goods trade balance deficit narrowed marginally instead of widening noticeably. While the Fed’s Patrick Harker avoided talking about US interest rates at his public appearance and Dennis Lockhart suggested he wanted further improvement before backing rate hikes, markets quickly priced in significantly higher odds of monetary tightening in December. At the time of writing the probability that US interest rates will not have risen after the December policy meeting had fallen from 46.9% to 38.3%.
With the Federal Reserve having indicated it wants to see signs of stronger inflationary pressures, investors will pay close attention to today’s personal income and personal spending figures for August. Increases here suggest building consumer demand, indicating prices are set to rise.
Canadian Dollar
Markets had started the day with a frenzy of activity after surprising news from the informal meeting by the Organisation of the Petroleum Exporting Countries (OPEC). OPEC announced that it had agreed to cut oil production by 700,000 barrels per day. The Canadian Dollar was prevented from advancing far, however, by investor scepticism; this is by no means the first time OPEC has gotten market hopes up. Later, US data overtook the oil news and the Canadian Dollar largely weakened, despite WTI Crude Oil having climbed above US$47 per barrel and Brent Crude rising
towards US$49 per barrel.
The Canadian Dollar could be set to weaken further today as July’s gross domestic product figure is expected to show growth slowed from 1.1% to 1%.
New Zealand Dollar
The New Zealand Dollar was largely advancing yesterday, despite the strengthening US Dollar and rising bets of Federal Reserve monetary tightening. There was no domestic data on the calendar to provide support, yet the ‘Kiwi’ was able to remain in positive territory overall.
The NBNZ business confidence index for September could spark some movement for the New Zealand Dollar, although focus is likely to be on the US data and the Chinese manufacturing PMI.
Data Released
September 30th 09.01 GBP GfK Consumer Confidence Survey (SEP) -5
September 30th 10.00 NZD NBNZ Business Confidence (SEP)
September 30th 11.30 AUD Private Sector Credit (YoY) (AUG) 5.9%
September 30th 19.00 EUR Eurozone Consumer Price Index Estimate (YoY) (SEP) 0.4%
September 30th 22.30 USD Real Personal Spending (AUG)
September 30th 22.30 CAD Gross Domestic Product (YoY) (JUL) 1%