Australian Dollar
US Dollar strength kept the Australian Dollar on the decline yesterday, with a closer look at the apparently positive domestic trade figures revealing little to be excited about. While the trade deficit narrowed from -2410 million to -2010 million in August, significantly further-than-forecast, this was largely due to a downwards revision in the previous month’s shortfall to -2121 million. Exports and imports remained largely the same, lending neither support nor resistance to the ‘Aussie’. The Australian Dollar decline solidified after the release of the latest US data.
While the Australian AiG performance of construction index for September is set for release today, the approach of one of – if not the – most important pieces of US data in terms of the Federal Reserve’s December interest rate decision is likely to see most domestic ecostats ignored.
Sterling
Brexit fears continued to drag the Pound even lower yesterday, with AUD/GBP climbing to a fresh three-year-and-two-month low. There was no impactful data on the calendar to provide support, while fears of a break from the single market remained to keep Sterling on the decline. Chancellor Philip Hammond was in the States, attempting to reassure US banks that the UK remained, to use the Chancellor’s own post-Brexit catchphrase, ‘open for business’. However, after the bold line taken by Theresa May over the past few days, Hammond was left with little room to manoeuvre and instead largely reinforced the expectation that the government will opt for a ‘hard Brexit’ when exit negotiations begin.
With even the key services PMI having failed to lift the Pound from its fresh lows, economists are starting to fear that the current Sterling decline could be set to continue for some time to come. Industrial and manufacturing production, as well as trade balance figures, usually have a strong impact upon GBP exchange rates. Whether they do this week remains to be seen, however.
Euro
The Euro saw a rocky performance yesterday thanks to mixed data from the Eurozone. German factory orders kicked off the day’s Eurozone releases on a positive, strengthening the common currency with solid, above-forecast growth both on the month and on the year. The construction PMI also performed favourably, rising further into growth territory. However, retail PMIs for September later weakened the Euro, with the Eurozone and French indices joining the Italian measure in contraction territory, while German retail growth slowed. Strong US data later in the day ensured the Euro approached the end of trading on the rise against the majority of its peers.
German industrial production statistics for August will be released later, although with markets focussed on the US it is likely the latest figures from the Eurozone’s powerhouse will have a more muted impact than usual.
US Dollar
Bets that the Federal Reserve will raise interest rates in December tightened once again yesterday thanks to more positive US data. The US Dollar was already buoyed by the impressive performance of the ISM non-manufacturing composite very early yesterday morning, but later unemployment figures boosted the ‘Greenback’ even further. Both initial and continuing jobless claims slowed on the previous week’s figures, undercutting forecasts and taking the four week moving average down to a 40-year low.
The non-farm payrolls report due out today will be one of the most important datasets between now and the December policy meeting (markets have largely written off the possibility of any policy changes in the November meeting). The forecast is for a strong rise of 170,000 after last month’s somewhat disappointing 151,000. If this, or higher, is achieved, then the odds of tighter monetary policy in December are likely to climb significantly higher.
Canadian Dollar
A surge in the number of building permits issued in August helped the Canadian Dollar to trend higher versus several of its most-actively traded peers, although losses were recorded against the Euro and the US Dollar. The number of permits issued beat forecasts tenfold, clocking in at 10.4% after the previous month’s upwardly-revised 3.4%. Oil was recovering well, boosted by a significant drop in US inventories, with WTI climbing above US$50 per barrel for the first time since June, while Brent rose over US$52.50.
Canada will release key unemployment rate and net change in employment figures for September today. No change in unemployment is expected from the current rate of 7%.
New Zealand Dollar
The New Zealand Dollar was pressured lower by the US Dollar’s strength yesterday, although the ‘Kiwi’ remained strong against the Australian Dollar and bullish versus Pound Sterling. The day’s only data from New Zealand, the ANZ truckometer, showed a -1.4% on the month drop in haulage activity in September.
There is no data from New Zealand on the calendar today, but with the US NFP on the way, there would likely be little movement for the ‘Kiwi’ from any domestic reports that were released anyway.
Data Released
October 7th 09.30 AUD AiG Performance of Construction Index (SEP)
October 7th 17.00 EUR German Industrial Production n.s.a. and w.d.a. (YoY) (AUG) 0.4%
October 7th 19.30 GBP Visible Trade Balance (Pounds) (AUG) -£11200
October 7th 23.30 USD Change in Non-farm Payrolls (SEP) 170k
October 7th 23.30 CAD Unemployment Rate (SEP) 7.0%