Australian Dollar
The US Dollar may have been weakening on Friday, but markets were in no mood to chase after risk either. Fears over the outcome of the election this week saw investors selling out of all risky assets and into safer currencies like the Swiss Franc. Bonds and gold were also on the rise as nervous traders looked to the most secure places to park cash. Even above-forecast retail sales growth and a Reserve Bank of Australia (RBA) Statement on Monetary Policy declaring the end of the mining bust weren’t enough to create ‘Aussie’ demand.
Should markets be able to distract themselves from the outcome of the US election, Thursday’s consumer inflation expectation for November could prove interesting.
Sterling
After a slow start, the Australian Dollar to Pound Sterling exchange rate slowly progressed further into negative territory. It seemed that the momentum from the High Court’s decision to uphold a challenge against the government’s right to trigger Article 50 without a vote was running out. But the aversion in markets to risk had seen some turn to the Pound as a safer bet, with the demand for UK government gilts also fuelling the need for Sterling trade.
With Chancellor Philip Hammond’s post-Brexit budget due to be revealed later this month, the latest trade balance figures, released on Wednesday, will be closely scrutinised. A weak performance here could give Hammond less room to manoeuvre with the country’s finances.
Euro
A disappointing run of Eurozone PMIs weakened the Euro initially, with uncertainty surrounding the US election further weighing on appetite for the common currency. The German composite index held steady at 55.1, while only Germany’s services PMI bettered expectations; the indices for Spain, Italy, France and the Eurozone all disappointed forecasts. However a slowdown in producer price decline, slightly uncertain US data and the falling US Dollar helped support the Euro higher. As with the Pound, the Euro saw heightened demand as investors flocked to buy Eurozone bonds and protect their cash.
The European Commission releases its Economic Forecasts on Wednesday. Given the current sluggish pace of Eurozone growth, investors will be hoping for signs of upward momentum.
US Dollar
Markets were, as one analyst put it, ‘having a full-on panic attack’ on Friday. The Standard & Poor’s 500 index was experiencing its worst losing streak in eight years after another day of losses, while heading towards its worst performance since 1980. Traders were selling out of the US Dollar as the odds of Donald Trump making it to the Oval Office continued to build. The day’s non-farm payrolls figure was, on closer examination, positive; job creation disappointed last month at 161,000, but a revision of September’s figures from 156,000 to 191,000 meant that the labour market was still in a strong condition. Investors were far too concerned with the election to be particularly cheered by high odds of Fed monetary tightening, which could be derailed anyway were Trump to take power.
There is little US data on the economic calendar this week, which is unsurprising as the entire focus of the coming days will be the election. It will be held on Tuesday November 8th, which is Wednesday 9th Australian time. Estimates suggest the vote may be formally announced around 16.00pm.
Canadian Dollar
Tensions between Iran and Saudi Arabia threatened to derail the upcoming OPEC discussions regarding a production freeze. The oil markets crashed down around -2.5% after Saudi Arabia threatened that, if Iran did not agree to curb its production, it would increase its oil output to further deflate the markets. WTI dropped below US$44 per barrel, while Brent was left languishing just above US$45. This, combined with the general risk-aversion gripping the markets, saw the Canadian Dollar sliding, despite a surprise 43,900 upsurge in employment during October against predictions of a -15,000 drop in the work force.
Wednesday will see the release of Canadian building permits figures for September.
New Zealand Dollar
The bearish state of global markets boded ill for the New Zealand Dollar on Friday. Like its commodity peers, the ‘Kiwi’ slumped, with nervous markets having little interest in hunting for yield when a Trump victory in the election could threaten to destabilise the global markets.
As if next week won’t hold enough volatility for the New Zealand Dollar, the Reserve Bank of New Zealand (RBNZ) is expected to cut interest rates to 1.75%.
Data Released
November 9th 00.30 CAD Building Permits (MoM) (SEP)
November 9th 16.00 USD US Election Result Announced (Estimated Time)
November 9th 20.30 GBP Total Trade Balance (Pounds) (SEP)
November 9th 21.00 EUR European Commission Economic Forecasts
November 10th 07.00 NZD Reserve Bank of New Zealand Rate Decision (NOV 10) (NOV 10) 1.75%
November 10th 11.00 AUD Consumer Inflation Expectation (NOV)