Australian Dollar
The Australian Dollar largely responded to the US Dollar yesterday, with AUD opening the session weak due to USD’s strength before seeing the trend reverse later in the day. Australian domestic data was positive, with August’s retail sales rising from 0.0% to 0.4%, double the rate forecast. Rumours of political trouble unsettled the ‘Aussie’ as former Prime Minister Tony Abbott was forced to address rumours that he intended to try and reclaim leadership from his usurper, Malcolm Turnbull.
Australia’s trade figures for August are expected to show a narrowing of the deficit from -2410 million to -2300 million.
Sterling
Continued adverse reaction to the Article 50 timeline announcement allowed the AUD/GBP exchange rate to climb to a three-year high yesterday. The UK services PMI weakened less-than-expected, edging down from 52.9 to 52.6 instead of to 52, but this provided little support for Sterling. Markets had hoped for a bullish increase in a similar vein to the above-forecast scores from the manufacturing and construction sectors earlier in the week. The Pound did eventually find some support, however, when Prime Minister Theresa May launched a scathing attack on low interest rates. Investors thought her words may create difficulties for the Bank of England (BoE) if it wants to loosen policy further, which saw the Pound edge into positive territory against most of the majors, although not the Australian Dollar.
There is no impactful data on the calendar for the UK today.
Euro
Eurozone data was mixed yesterday, with the Euro edging lower against a number of its major peers. French, Italian and Spanish services and composite PMIs weakened beyond forecasts, weighing on the Eurozone composite. The overall measure held steady, despite better-than-anticipated scores from Germany. Retail sales in the Eurozone were also disappointing, even if the monthly decline was lower-than-forecast. Annualised sales growth slowed from a downwardly-revised 1.8% to 0.6%. There was further speculation that the US Department of Justice (DoJ) would lower the fine levied against Deutsche Bank, although this did little to improve Euro appetite.
German factory orders is the first of several pieces of Eurozone data released today.
US Dollar
The US Dollar started yesterday strong, with high odds of a Fed rate hike in December fuelling demand for the ‘Greenback’. However, appetite for USD soured later in the session after the release of the latest domestic data. The ADP employment change figure for September showed a slowdown in the number of new jobs created, with the slowdown from 177k to 154k coming in -11k below forecast. Markets use the ADP figure as an indicator of the highly influential non-farm payrolls report (due tomorrow), despite there being little correlation between the performance of the two. The fact the ADP printed poorly suggested to investors that the NFP would do the same, scuppering the odds of an interest rate hike from the Fed. The US Dollar quickly cheered up after a soaring ISM composite PMI, however, which leapt from 51.4 to 57.1, significantly eclipsing forecasts of an uptick to 53.
US initial and continuing jobless claims figures are set for release today.
Canadian Dollar
The Canadian Dollar was weak yesterday, with investors put off by a -0.2% reduction to growth forecasts for this year and the next from the International Monetary Fund (IMF). The latest international merchandise trade figure helped improve ‘Loonie’ sentiment, however, after revealing a much larger narrowing of the trade deficit than expected. Markets had been speculating throughout the day that the latest US crude oil inventories figure would show a significant reduction in stockpiles. This quickly boosted the oil markets, but the positive effect of this took a while to filter through to the Canadian Dollar.
The number of building permits issued in Canada during August is expected to have increased 1% on the previous month; an acceleration in pace after July’s 0.8% month-on-month increase.
New Zealand Dollar
A research note from RBS weakened the New Zealand Dollar yesterday after warning that markets were underestimating the likelihood that the Reserve Bank of New Zealand (RBNZ) would cut interest rates in the near-term. RBS analysts identified that markets had priced in odds of 35% that policy would be loosened further, which they said was not high enough. The note highlighted the New Zealand Dollar’s current strength; it remains over 77.4 on a trade-weighted basis. According to the RBNZ’s August Monetary Policy Statement, a scenario in which NZD trended around 76 on a trade-weighted basis would necessitate cuts below 1% for the official cash rate in order to stimulate price growth to within the target range.
The only New Zealand data on the calendar today is the ANZ truckometer, which measures haulage activity. The gauge saw a surge in activity in August, suggesting strong business activity. A slowdown may be expected given the extent of the previous 6.7% rise.
Data Released
October 6th 08.00 NZD ANZ Truckometer Heavy (MoM) (SEP)
October 6th 11.30 AUD Trade Balance (Australian dollar) (AUG) -2300m
October 6th 17.00 EUR German Factory Orders n.s.a. (YoY) (AUG) 1.6%
October 6th 23.30 CAD Building Permits (MoM) (AUG) 1.0%
October 6th 23.30 USD Initial Jobless Claims (OCT 1)