Australian Dollar
Yesterday’s Australian data was largely mixed, but the Australian Dollar weakened due to the downward pressure from returned US Dollar demand. With over 70% odds of a December rate hike and a low US Dollar after a day of market closure, safe-haven demand was firmly on, leaving the ‘Aussie’ an undesirable prospect. Consumer confidence edged lower in the week ending October 9th, the number of home loans continued to decline, doing so at double the pace forecast. Investment lending growth slowed from 0.5% to 0.1%.
Today’s Westpac consumer confidence index for October could help the ‘Aussie’ recover from yesterday’s lows if sentiment is shown to have improved.
Sterling
The Australian Dollar weakened against the Pound yesterday, despite continued markets fears regarding the negative impact of a ‘Hard Brexit’ on the UK economy. A leaked Treasury report suggested that cabinet members were expecting a ‘Hard Brexit’ to significantly weaken the UK economy, with forecasts for public sector receipts being up to -£66 billion lower per year in 15 years’ time. Meanwhile heads of Citi and Morgan Stanley both said they may start relocating outside of the UK if it leaves the single market, with Citi’s UK head James Bardrick commenting that the decision could be taken as soon as 2017 Q1 when the government triggers Article 50.
There is barely any data on the calendar from the UK today and nothing that will affect the Pound, unless something drastic happens during the Bank of England’s (BoE) latest bond purchasing operation.
Euro
While the Euro started the day in a position of relative strength, many of the morning’s gains had turned into losses by the end of the session. The news that Eurogroup had approved the latest round of Greek bailout funding supported demand until developments surrounding the latest Irish government budget caused market consternation. Finance Minister Michael Noonan told the Dail (Irish parliament) that Ireland’s low corporation tax rate would not be changed and that Ireland’s tax regime would remain competitive. Considering the EU is currently trying to crack down on tax avoidance amongst large companies, this attitude could create tensions.
Eurozone industrial production figures could prove supportive today, with monthly output expected to have grown 1.5% in August after July’s -1.1% decline, while annual production is forecast to increase 1% after the previous -0.5% contraction.
US Dollar
After Monday’s low demand for the US Dollar due to closed US markets, yesterday saw the ‘Greenback’ making a strong recovery. Comments from Federal Reserve official Charles Evans did nothing to soften either the US Dollar or bets of an interest rate hike, even though he suggested that keeping monetary policy loose for longer would not overly damage the economy. Evans claimed that overshooting the inflation target would not have as serious a set of consequences for the economy as feared. However, he also noted that one rate hike would not damage inflationary prospects and that he may support a hike, depending upon the performance of data in the run up to the Federal Open Market Committee (FOMC) meeting.
US mortgage applications figures are the only US ecostat on the calendar today.
Canadian Dollar
The Canadian Dollar was largely on the advance yesterday, supported by a strong housing starts figure for the previous month. Starts came in 30k above forecast at 220k, although the previous month’s number of beginning home construction projects was revised lower to 182.4k. Crude oil was weakening, although even with losses WTI and Brent were both trending around a level not seen for a year. The softening was in response to comments from the head of Russia’s largest oil producer suggesting he had no intention of cooperating with the Organisation of the Petroleum Exporting Countries (OPEC) in cutting production.
There is no Canadian data on the calendar today.
New Zealand Dollar
Domestic data was positive, but the New Zealand Dollar slumped yesterday. Data for September showed that card spending on retail had grown 1.9% instead of the forecast 0.8% last month, while overall card spending increased 2%. In both cases the previous month’s declines were revised lowered, however. Markets were reacting negatively to further suggestions of an upcoming interest rate cut from the Reserve Bank of New Zealand (RBNZ). Assistant Governor John McDermott noted that he expected inflation data scheduled for release next week to be weak and that further policy easing would likely be needed to boost price growth to within the target range.
There is no New Zealand data on the calendar today.
Data Released
October 12th 00.50 GBP Bank of England Bond-Buying Operation Results
October 12th 10.30 AUD Westpac Consumer Confidence (OCT)
October 12th 20.00 EUR Eurozone Industrial Production w.d.a. (YoY) (AUG) 1.0%
October 12th 22.00 USD MBA Mortgage Applications (OCT 7)