Australian Dollar
Despite a solid improvement in the Export Price Index the Australian Dollar struggled to gain particular traction against rivals on Thursday. Confidence in the antipodean currency was hampered by a general increase in market risk aversion, with profit taking helping to erode the recent gains of the ‘Aussie’. Even so, this stronger showing puts less pressure on the Reserve Bank of Australia (RBA) to consider returning to an easing bias in the near future, a prospect that should offer some support to the Australian Dollar ahead of the weekend.
An improvement in the third quarter Producer Price Index could see AUD exchange rates making fresh gains today, with an uptick indicating a further increase inflationary pressure.
Sterling
Market reaction was somewhat mixed to the third quarter UK GDP report, despite growth having only slowed from 0.7% to 0.5% on the quarter. Concerns were prompted by the fact that this growth was entirely driven by the service sector, with all other parts of the domestic economy contracting in the post-referendum period. While there was news that Nissan would be producing two new car models at its Sunderland plant, investors had some trepidation over quite what the government needed to concede to secure this pledge.
Brexit-based anxiety is expected to keep the Pound under pressure heading into the weekend, with any political developments likely to trigger market volatility.
Euro
There was some relief amongst investors when it was announced that Belgium had come to an agreement over the CETA treaty, igniting hopes that the trade deal could be signed sooner rather than later. A boost for the Euro also came from news that Deutsche Bank had made an unexpected profit in the last quarter, something which eased concerns over the outlook of the health of the banking sector.
Even so, volatility for the single currency is likely to occur in response to the German Consumer Price Index, which is forecast to strengthen from 0.7% to 0.8% on the year.
US Dollar
Although the latest raft of US data proved mixed, this failed to dent the US Dollar. Durable goods orders showed a surprise slump in September, seeming to indicate a greater weakening in consumer confidence. Nevertheless, with continuing jobless claims falling further than forecast and safe-haven demand on the up, the ‘Greenback’ was encouraged to make fresh gains. Stronger-than-expected pending home sales also offered a boost to the US Dollar, with the domestic housing market demonstrating continued resilience.
Heading into the weekend the AUD/USD exchange rate is expected to come under fresh pressure, as a strong showing on third quarter US GDP would boost the odds of a December Fed rate hike further.
Canadian Dollar
Some measure of confidence returned to the Canadian Dollar on Thursday, with the commodity-correlated currency buoyed by a recovery in oil prices. After US crude oil inventories unexpectedly dipped on the week Brent crude was able to claw its way back above the US$50 per barrel mark. While doubts remain over the likelihood of oil producers reaching any arrangement over limits in the near future this recovery was enough to boost the ‘Loonie’.
Should oil continue to trend higher and break back above US$51 per barrel then the Canadian Dollar could extend its gains ahead of the weekend.
New Zealand Dollar
Disappointment greeted the September New Zealand trade data, with the ‘Kiwi’ discouraged by a sharper increase in imports than forecast. As the rise in export volumes fell short of forecast this resulted in a widening of the trade deficit. This did not encourage confidence in the outlook of the domestic economy, pushing the New Zealand Dollar lower in the midst of risk averse trading.
With no further New Zealand data set for release this week the ‘Kiwi’ could remain under pressure, particularly if the US Dollar strengthens.
Data Released
October 28th 11.30 AUD Producer Price Index (YoY) (3Q) 1.0%
October 28th 20.00 EUR German Consumer Price Index (YoY) (OCT P) 0.8%
October 28th 23.30 USD Gross Domestic Product (Annualised) (3Q) 2.5%
October 28th 23.30 USD Personal Consumption (3Q A) 2.6%