Australian Dollar
Another rate freeze from the Reserve Bank of Australia (RBA) gave the Australian Dollar a boost yesterday, with the ‘Aussie’ recording bullish advances against its major peers. The accompanying policy statement indicated that policymakers had no plans to cut rates again and noted that economic growth and inflation remained broadly in line with forecasts. Also supporting the Australian Dollar was a return to growth territory for the AiG performance of manufacturing index, a half-point rise in weekly consumer confidence and an unexpected 0.9 point rise in the Chinese manufacturing index.
The rate of building approvals in September is expected to have declined markedly on the month and slowed significantly on the year.
Sterling
Markets were relieved that Mark Carney had decided to stay on until 2019 as Bank of England (BoE) Governor, but disappointed he hadn’t opted for the full eight year term available. The latest Markit UK manufacturing PMI also caused significant concern, paving the way for the Australian Dollar to Pound Sterling exchange rate to weaken markedly. The PMI fell from 55.5 to 54.3; this still showed the sector to be growing at a decent pace, but news of rising cost pressures worried investors. Capital Economics claimed that the data on rising input prices signalled inflation could spike to around 5% ‘over [the] next few quarters’.
While not usually an impactful release, the fact that investors are currently panicking about rocketing UK inflation could see the BRC shop price index for October coming under closer scrutiny than usual. Also of interest will be the Markit/CIPS UK construction PMI, which is anticipated to weaken from 52.3 to 51.8.
Euro
The Euro weakened against the Australian Dollar, but remained largely bullish elsewhere yesterday. There was a general lack of economic data on the calendar, so there were no headwinds to slow the common currency’s gains against weaker peers. While Monday’s GDP figures for the Eurozone had caused some concerns due to the slow, if consistent, pace of economic expansion within the currency bloc, investors were feeling better about the data yesterday. Inflation was the highest in two years and the GDP figures showed the Eurozone hadn’t taken a hit from ‘Brexit’; things investors decided to feel positive about yesterday.
German unemployment figures for October could soften Euro appeal, with the number of people in employment forecast to have declined by -1,000 persons.
US Dollar
The US Dollar weakened yesterday as the Federal Reserve began their November policy meeting. The approach of key manufacturing data also stayed the hands of traders, although the ‘Greenback’ failed to recover from its lows after the index printed positively. The ISM survey has shown an above-forecast rise in the pace of sector growth, with the previous score of 51.5 rising to 51.9. This caused bets of monetary tightening in December to climb to over 82%, with over three-quarters of the market expecting to see a 0.25% increase to the target range. No changes are expected from today’s meeting; the results of which will be announced early on Thursday. However, markets want to see a hawkish tone from the Federal Open Market Committee (FOMC) and so kept away from the US Dollar for the time being.
The latest ADP employment change figure will be released tonight. As always, while there is little actual correlation between the two, investors will use the data as an indication of how well or poorly Friday’s non-farm payrolls figure has performed.
Canadian Dollar
Canadian GDP figures painted a mixed picture of the economy during August, leaving the ‘Loonie’ on an uncertain footing. Growth clocked in at 1.3% year-on-year as predicted, although the previous month’s figure was revised to 1.2%. On a monthly basis, the economy posted its third consecutive month of growth, but the pace of expansion had halved from a downwardly revised 0.4% to 0.2%.
There is no impactful Canadian data on the calendar today.
New Zealand Dollar
The latest Global Dairy Trade auction saw an 11.4% increase in dairy prices, with the average winning price climbing to US$3,327 per metric tonne. This gave the New Zealand Dollar a sizeable boost ahead of today’s labour market data. A rise in the Chinese manufacturing PMI from 50.4 to 51.2, against forecasts of a downtick to 50.3, also helped support risk appetite. Gains were not as bullish as those made by the Australian Dollar, with the ‘Aussie’ stealing focus from its antipodean cousin.
An acceleration in the third-quarter employment rate growth from 4.5% to 5.4% is predicted today; this is likely to support the ‘Kiwi’ higher.
Data Released
November 2nd 08.45 NZD Employment Change (YoY) (3Q) 5.4%
November 2nd 11.01 GBP BRC Shop Price Index (YoY) (OCT)
November 2nd 11.30 AUD Building Approvals (YoY) (SEP) 2.1%
November 2nd 19.55 EUR German Unemployment Change (OCT)
November 2nd 20.30 GBP Markit/CIPS UK Construction PMI (OCT) 51.8
November 2nd 23.15 USD ADP Employment Change (OCT) 165k