Australian Dollar
The Australian Dollar was largely strong on Friday, although the ‘Aussie’ did slide versus the US Dollar. Despite their often converse relationship, part of the US Dollar’s support was also what drove the Australian Dollar higher. After the final presidential election debate, markets were increasingly confident that Hillary Clinton will win the race to the White House. This would see significantly lower market volatility than if controversial Republican Donald Trump were to take power, so traders are using the improved outlook as a chance to hunt for yield while the markets seem stable. The high-risk ‘Aussie’ has therefore seen notable demand, even as the US Dollar strengthens.
Wednesday sees the release of the third quarter Australian consumer price index. The Reserve Bank of Australia (RBA) has a history of making its policy adjustments in the wake of the quarterly report being released, so a particularly negative or positive figure could drastically impact how investors perceive the policy bias of Australia’s central bank.
Sterling
Theresa May was attending her first European Council meeting on Friday, with the Australian Dollar capitalising on the Pound’s weakness as markets reacted adversely to the latest developments. Investors were not impressed with the event, which saw Theresa May given just five minutes to lay out her Brexit vision; at 1am after dinner had been concluded. May’s assertion that the UK would play a full and central role in the EU right up until the point it leaves was not warmly received, while (according to the Guardian) European Commission President Jean-Claude Juncker summarised the Prime Minister’s Brexit comments with nothing more than a shrug and a simple ‘Pfff’.
Government borrowing figures also disappointed, showing a marginally higher deficit against forecasts of a narrowing shortfall. With six months of the financial year left, Phillip Hammond is already running a deficit just -£10 billion under the official forecast target for the whole year.
UK third-quarter GDP figures will be released on Thursday. Unlike several previous GDP releases, these figures may actually cause significant AUD/GBP movement as this data will cover the period during and immediately after the referendum vote.
Euro
The Euro was mixed, although largely weak on Friday, with markets still unimpressed by the tone struck by European Central Bank (ECB) President Mario Draghi at the latest press conference. While Draghi at least opined that it was unlikely quantitative easing would be abruptly halted, he also left the door open for further policy easing in December. Economists were confused as to what the ECB’s next move would be, but the weakening of the Euro suggested markets were bracing for further policy loosening.
Friday sees the release of the German consumer price index for October. These preliminary figures could boost the Euro if they show strong inflationary pressures, as this will help ease market expectations of further policy loosening from the European Central Bank.
US Dollar
There was nothing on the US economic calendar on Friday, but the US Dollar nonetheless saw strong demand. Bets from the futures market that the Federal Reserve would tighten policy in December increased from their recent highs, hitting odds of 74%. This helped keep appetite for the ‘Greenback’ hot, with the negative effects of Thursday’s disappointing unemployment data wearing off. As the initial and jobless claims data is released on a weekly basis, some volatility is to be expected and markets are more interested in the big picture data like the non-farm payrolls.
There are several high-impact data releases on the calendar for the coming week; the first of these will be October’s consumer confidence figures on Wednesday. Confidence is expected to fall from 104.1 to 101.5.
Canadian Dollar
Below-forecast data tipped the Canadian Dollar into a decline as the weekend approached. Retail sales declined -0.1% in August on the month, while sales excluding autos stagnated as July’s figure was revised down to -0.2%. Consumer price growth clocked in below expectations as well; on the month prices grew 0.1% instead of 0.2% as expected, while on the year price growth accelerated from 1.1% to 1.3%, missing forecasts by ten basis points. Core price growth did hold steady at 1.8% in line with predictions, however.
Canada has barely any data set for release during the coming week, with Monday’s low-impact whole sales figure for August being one of just two items on the calendar.
New Zealand Dollar
The New Zealand Dollar was mixed overall before the weekend, as record high migration figures reignited concerns that the country’s infrastructure is not sufficient to cope with the rate of population growth. Experts had hoped migration might have peaked already, but instead net migration rose above the 6,000 mark for the first time in six months, clocking in at 6,300. On the year net migration was 70,000, beating the previous record hit in August.
New Zealand’s trade balance numbers are set for release on Thursday. Last month saw a significant rise in the deficit; indications this is a trend will likely undermine the ‘Kiwi’
Data Released
October 24th 22.30 CAD Wholesale Sales (MoM) (AUG)
October 26th 00.00 USD Consumer Confidence (OCT) 101.5
October 26th 10.30 AUD Consumer Prices Index (YoY) (3Q)
October 27th 07.45 NZD Trade Balance (New Zealand dollars) (SEP)
October 27th 18.30 GBP Gross Domestic Product (YoY) (3Q A)
October 28th 22.00 EUR German Consumer Price Index (YoY) (OCT P)