Australian Dollar
Risk appetite was prevalent yesterday, with investors favouring the Australian Dollar due to weakness overseas. The US Dollar was unappealing due to speculation surrounding key economic data later in the week, while the Euro was on the decline due to expectations of further policy easing later this year. Of the commodity currencies, the Canadian Dollar was on the decline thanks to weakening oil prices and the potential collapse of a vital trade deal. This left the ‘Aussie’ as the natural choice for many investors, despite the lack of domestic data to provide support.
There is little on the calendar today from Australia, but tomorrow sees the release of the third-quarter consumer price index. Inflation is expected to have ticked higher by ten basis points to 1.1%, which should soften fears of further policy easing from the Reserve Bank of Australia (RBA).
Sterling
The Australian Dollar to Pound Sterling exchange rate made minor gains yesterday. The Pound was soft thanks to underwhelming domestic data and international news. The latest CBI survey showed that, while manufacturers were feeling drastically more upbeat about the future, the rate of new orders slumped. Additionally, over half of those surveyed claimed that weakening Pound exchange rates were bad for their business, or made no difference, despite the tumble being lauded as an advantage for the sector. Also weakening the Pound were reports that the first meeting between Theresa May and the leaders of Northern Ireland, Wales and Scotland had not been particularly productive. Scottish First Minister Nicola Sturgeon claimed parts of the meeting were ‘frustrating’, with her comments suggesting the government still doesn’t have solid plans for Brexit.
UK third quarter GDP on Thursday is expected to hold steady at 2.1%. Any surprises here, whether they be upside or downside, could cause significant AUD/GBP movement given that this will be the first big picture data to cover the period immediately before, during and after the EU referendum.
Euro
The Euro was on a weak footing yesterday, unable to make anything other than minor gains versus the majority of its peers. Investors continued to be preoccupied by last week’s suggestions from European Central Bank (ECB) President Mario Draghi that further policy easing could be on the way in December. The latest run of PMIs for the Eurozone, France and Germany largely printed noticeably above forecast, with the exception of the French services and composite measures, which weakened. Regardless, the positivity generated by the data was muted by expectations of further stimulus in the near-term, sapping Euro appetite.
Preliminary German inflation data for October is expected to reveal that consumer prices rose at a faster pace this month, up to 0.8% from 0.7% previously.
US Dollar
The US Dollar was weak overall yesterday, barely able to hold opening levels versus many of its peers. Investors were in a more risky mood, turning to the Australian Dollar, or putting their money into the stock market ahead of corporate earnings figures. Also making the markets reluctant to move on the ‘Greenback’ was the approach of key data releases this week. Consumer confidence and the advance trade balance are due on Wednesday, durable goods orders on Thursday and GBP and personal consumption on Friday. Investors will likely wait until they have a clearer picture of the US economy before adjusting their positions.
There is no US data due today, but Wednesday will hold both the consumer confidence score and the advance goods trade balance figures.
Canadian Dollar
With Belgian Prime Minister Charles Michel unable to secure support for the Comprehensive Economic and Trade Agreement (CETA) from all of his regional authorities, Canada’s hopes of a trade deal with the EU were near to collapse yesterday. The Canadian trade minister declared the deal a failure, while EU officials scrambled to offer hope. CETA has been in negotiation for several years and the prospect of falling at the final hurdle was keeping investors from buying into the Canadian Dollar yesterday, with the ‘Loonie’ sliding versus its peers.
The CFIB business barometer for October is the only Canadian data on the calendar this week.
New Zealand Dollar
The New Zealand Dollar weakened yesterday. With no data on the calendar, investors were busy focussing on the future; for the ‘Kiwi’ that potentially involves weakening in response to expected monetary loosening from the Reserve Bank of New Zealand (RBNZ) in November. The latest Monetary Policy Statement (MPS) – which will give the markets a strong indication of whether the RBNZ holds an easing bias going into the future – will be released after the next meeting, giving investors an even stronger reason to hold fire for the time being.
The New Zealand trade balance figures on Thursday are expected to show that the deficit narrowed back down from -1265 million to -1123 million in September.
Data Released
October 26th 00.00 USD Consumer Confidence (OCT) 101.5
October 26th 10.30 AUD Consumer Prices Index (YoY) (3Q) 1.1%
October 27th CAD CFIB Business Barometer (OCT)
October 27th 07.45 NZD Trade Balance (New Zealand dollars) (SEP) -1123m
October 27th 18.30 GBP Gross Domestic Product (YoY) (3Q A) 2.1%
October 28th 22.00 EUR German Consumer Price Index (YoY) (OCT P) 0.8%