Australian Dollar
Profit-taking undermined the Australian Dollar yesterday, with the ‘Aussie’ trending in negative territory versus a number of its peers. Traders were capitalising on the strong gains made following Tuesday’s decision by the Reserve Bank of Australia (RBA) to freeze interest rates, while showing no signs of an easing bias. Further motivating traders to sell out of the Australian Dollar were the latest building approvals figures. The decline in approvals on the month accelerated in September from -1.8% to -8.7%, while on the year approvals fell -6.4% after growing 10.3% previously.
The AiG performance of service index for October is due out today. The index is currently in contraction territory, but a rise of 1.2 points or higher would show that the sector returned to growth.
Sterling
The Australian Dollar to Pound Sterling exchange rate slumped yesterday, as the latest Markit UK construction PMI gave GBP a boost. Expected to weaken from 52.3 to 51.8, the index instead climbed to 52.6. This gave markets two reasons to expect the Bank of England (BoE) would not loosen monetary stimulus as a result of today’s policy meeting. Firstly, the two PMIs released this week have shown that the UK economy remains resilient to the shock of the vote for Brexit. Secondly, both indices have also indicated that inflation is set to rocket, which could potentially deter the Monetary Policy Committee (MPC) from cutting rates further.
It could be a volatile day for the Australian Dollar to Pound Sterling exchange rate today, with the vital services PMI being released shortly before the Bank of England announces its latest policy decisions and releases the next Inflation Report.
Euro
Volatility in the US had caused traders to turn to risk assets yesterday, keeping demand for the Euro soft, despite very positive domestic data. The common currency remained mixed across the board, even after German unemployment unexpectedly fell -13,000, taking the rate of joblessness down to 6%, against forecasts of no change at 6.1%. Bonds were in high demand yesterday, which caused some market jitters due to the implications of rising prices for the European Central Bank’s (ECB) quantitative easing programme. Higher demand for bonds makes it more costly for the ECB to buy them; if the price of certain bonds climbs too high then the rules of the asset purchase programme would prevent the ECB from buying them.
The ECB will release its latest Economic Bulletin today.
US Dollar
A new poll of voters put Donald Trump ahead of Hillary Clinton in the race for the White House, sparking investor panic. The US Dollar slumped as traders looked for safer havens for their money, buying into gold and bonds instead. Markets were also perturbed by the latest ADP employment change figure, which showed a slowing rate of job creation in October; down to 147k from 154k, despite forecasts of an uptick to 165k. The ADP is often seen as a bellwether for the non-farm payrolls figure, the latest iteration of which is due on Friday. Weakening job creation could give the Fed a reason to step back from a rate hike in December.
Unemployment data is set for release today. Initial jobless claims are expected to have slowed while continuing claims are predicted to have increased in the week to October 29th.
Canadian Dollar
Industry data from the US suggested that the next oil stockpiles report would show a 9.3 billion surge in oil stocks. This took analysts and markets by surprise and caused crude oil to weaken, dragging the Canadian Dollar lower. The damage worsened when the figures were actually released; stockpiles grew by a record 14.4 million barrels. The Canadian government also showed that the current slow growth rate wasn’t concern them, with Finance Minister Bill Morneau announcing billions in additional spending over the coming years. The upping of fiscal stimulus was not encouraging enough to distract from the fall in oil prices, however.
There is no Canadian data on the calendar today.
New Zealand Dollar
A handful of positive circumstances combined to send the New Zealand Dollar roaring ahead yesterday. As well as the rise in dairy prices, unemployment dropped unexpectedly from 5.1% to 4.9% in the third quarter, while the rate of employment change climbed from 4.5% to 6.1%, eclipsing projections of a smaller rise to 5.4%. The latest survey of inflation expectations showed that experts had revised their two-year predictions marginally higher – a positive sign given the country has struggled with soft price growth for some time now. The global demand for bonds also benefited the ‘Kiwi’, with investors transferring their money into New Zealand Dollars in order to buy government treasuries, which are highly attractive given New Zealand’s high interest rates.
The only New Zealand data on the calendar today is the ANZ commodity price index. Given the low-impact nature of the data, the ‘Kiwi’ may be moved by other market factors and could be vulnerable to a sell-off given today’s bullish gains.
Data Released
November 3rd 09.30 AUD AiG Performance of Service Index (OCT)
November 3rd 11.00 NZD ANZ Commodity Price (OCT)
November 3rd 20.00 EUR ECB Publishes Economic Bulletin
November 3rd 23.00 GBP Bank of England Rate Decision (NOV 3) 0.25%
November 3rd 23.30 USD Continuing Claims (OCT 22) 2045k