Australian Dollar
The Australian Dollar ended the week trending positively in most cases, although the ‘Aussie’ lost out to its commodity-correlated peers. News that government spending had come in under predictions cheered investors, with the 2015-16 deficit clocking in -AU$340 million below expectations at AU$39.6 billion. While representing an increase of AU$1.9 billion on the previous year, the deficit was over -AU$2 billion smaller than predictions made by Deloitte Access Economics earlier in the year. Weak US data further improved the Australian Dollar’s fortunes.
The Reserve Bank of Australia (RBA) meets to decide interest rates on Tuesday. A freeze is currently expected; markets will be watching to see if new Governor Philip Lowe has had any influence on the overall tone taken by the Bank.
Sterling
While the Pound may have been boosted elsewhere by Friday’s run of positive UK data, the AUD/GBP exchange rate managed to hold gains. UK consumer confidence rebounded to pre-referendum levels, the Lloyds business barometer registered a strong improvement, quarterly GDP was revised higher and data measuring the service sector showed the pace of growth had doubled on the month and edged higher in the three months to July. The data was positive enough for some observers to suggest the need for an additional Bank of England (BoE) interest rate cut had been lessened.
The services PMI will be the most-awaited UK data this week.
Euro
Fears over the Eurozone banking sector – in particular Deutsche Bank – dragged the Euro lower despite the presence of positive data on the calendar. Unemployment may not have edged down any further, but at 10.1% the rate of joblessness in the currency bloc remained at a five-year low. Consumer price growth doubled in September, accelerating from 0.2% to 0.4%. This is likely to have relieved the European Central Bank (ECB), which is currently running ultra-loose monetary policy in order to stimulate inflationary pressures. With inflation also having increased in Germany, the outlook for the currency bloc may be improving. Unfortunately, concerns regarding Deutsche Bank overrode the positive data.
The Eurozone data docket is relatively empty over the coming days, with Thursday’s Eurozone retail PMI being one of the most impactful reports on the calendar.
US Dollar
After Thursday’s upwards GDP revision gave a strong boost to bets of an interest rate hike in December, Friday saw markets growing much more dovish once more. The Fed’s Neel Kashkari commented that interest rates should stay low. While Kashkari is not a voting member of the Federal Open Market Committee (FOMC), he does take part in policy setting meetings. His stance sparked concerns amongst traders that the Fed would largely stick to their guns at the December policy meeting. Income figures indicated that there may be some justification to Kashkari’s stance; personal spending saw no growth in August, instead of slowing from 0.3% to 0.1% as forecast, while real personal spending declined -0.1% instead of meeting predictions of stagnation.
There are several key US data releases on the calendar this week, but the most influential will be the non-farm payrolls on Friday. The Fed left rates on hold this month in order to promote growth in the labour market, so a strong figure here will greatly improve odds of the monetary tightening in December.
Canadian Dollar
The Canadian Dollar was largely strong on Friday, boosted by better-than-expected gross domestic product figures. GDP edged lower on the month from 0.6% to 0.5%, but this was much better than the halving of growth forecast. On an annualised basis GDP accelerated, hitting 1.3% after June’s figure was revised to 1.2%. The annual figure had been expected to print at 1%. Oil had declined earlier in the session, but was recovering losses towards the weekend, while remaining at around five-week highs, providing further support for the ‘Loonie’.
Friday’s unemployment rate and net change in employment figures could cause significant volatility for the Canadian Dollar.
New Zealand Dollar
Friday’s New Zealand data was largely positive, giving the New Zealand Dollar a boost. Investors were also driven to the ‘Kiwi’ due to the weakening US Dollar; the Australian Dollar was less appealing than its antipodean cousin due to the proximity of an interest rate decision from the Reserve Bank of Australia (RBA). After last month’s huge -10.5% tumble, the decline in number of building permits issued slowed to -1%. The ANZ activity outlook jumped from 33.7 to 42.4 and the NBNZ business confidence index climbed from 15.5 to 27.9.
The most impactful development on the calendar for New Zealand this week will be the Global Dairy Trade auction. Another price rise here would be the fifth in a row and NZD supportive.
Data Released
October 4th NZD Dairy Auction Avg. Winning Price MT (OCT 4)
October 4th 13.30 AUD Reserve Bank of Australia Rate Decision (OCT 4) 1.5%
October 5th 18.30 GBP Markit/CIPS UK Services PMI (SEP)
October 6th 18.10 EUR Markit Eurozone Retail PMI (SEP)
October 7th 22.30 USD Change in Non-farm Payrolls (SEP) 173k
October 7th 22.30 CAD Unemployment Rate (SEP)