Australian Dollar
Fears over the future of global trade gripped the markets on Friday, with the Australian Dollar again slumping versus the majority of its peers. Donald Trump’s fierce protectionist stance, exhibited during his campaign, is coming back to haunt markets. The Republican President-elect previously opposed the Trans Pacific Partnership agreement; a mammoth deal between twelve countries that accounts for 40% of world trade. The US is Australia’s 4th largest trading partner and only one of the top five not in Asia. The potential for Trump to end these agreements is therefore weighing on the Australian Dollar due to the huge impact doing so could have upon the Australian economy.
If markets have calmed down towards the end of the week, Thursday’s employment change figures could move the Australian Dollar.
Sterling
The markets may have been largely fearful over the future for global trade, but investors were bullish on the Pound due to hopes of favourable terms for US-UK relations. The Australian Dollar to Pound Sterling exchange rate dove further after Trump called Theresa May, the UK Prime Minister, to stress the importance of the ‘special relationship’ between the two countries. Hopes President Trump will allow the UK to quickly forge a partnership with the US after Brexit helped improve the market’s outlook on the UK’s future.
Markets may not respond so negatively should consumer price index data show rising inflation again on Tuesday, as the current strength of Sterling will have helped to limit the potential overshoot.
Euro
The commodity rout on Friday saw the Euro enjoying a strong uptrend against risky currencies like the Australian Dollar and the New Zealand Dollar. However, fears that it was the Eurozone’s turn for a huge political shake-up kept investors away from the common currency in other instances. A key Italian referendum on constitutional reform is approaching; Prime Minister Matteo Renzi has hung his political career on success, meaning a defeat could leave Italy’s political landscape open to colonisation by the country’s popular far-right movements.
Tuesday will likely be a volatile day for the Euro thanks to the presence of German, Italian and Eurozone Q3 GDP data and the latest German ZEW survey on the economic calendar.
US Dollar
The US Dollar continued to be largely bullish on Friday, with investor appetite for the ‘Greenback’ still buoyed by the prospect of ‘Trumpflation’. The President-elect’s fiscal policies are predicted to give the economy a short-term lift and boost inflation. This, combined with Trump’s claims that he is not seeking the resignation of current Federal Reserve Chair Janet Yellen, helped support demand for the US Dollar.
Investors do seem to still be paying attention to what the Fed are planning on doing in December, which means the US Dollar might still respond to headline economic data, especially October’s consumer price index on Friday.
Canadian Dollar
While the Canadian Dollar was performing better against its commodity brethren on Friday, things were far from rosy for the ‘Loonie’. The future of NAFTA – the North America Free Trade Agreement – was looking bleak considering the antipathy held towards it by the incoming President. On top of this, WTI crude oil was down -2.5% after OPEC reported that production had been 240,000 barrels per day higher than in September – an eight year high, in fact.
While investors may still be on tenterhooks regarding the future of NAFTA, October’s Canadian consumer price index data could also be a significant driver of the ‘Loonie’.
New Zealand Dollar
As New Zealand is also involved in the Trans Pacific Partnership, the New Zealand Dollar was pushed into a slump by worries over the future of its export industry. The latest Reserve Bank of New Zealand (RBNZ) policy meeting continued to weigh on the ‘Kiwi’ as well. RBNZ Governor Graeme Wheeler had commented that the market volatility caused by Donald Trump’s election could warrant further cuts, keeping the outlook for New Zealand monetary policy bearish.
Should the markets have calmed down by tomorrow, the New Zealand Dollar could be supported higher by the latest dairy auction, should prices rise.
Data Released
November 15th NZD Dairy Auction Avg. Winning Price MT (NOV 15)
November 15th 20.30 GBP Consumer Price Index (YoY) (OCT)
November 15th 21.00 EUR Eurozone Gross Domestic Product s.a. (YoY) (3Q P)
November 17th 11.30 AUD Employment Change (OCT)
November 18th 00.30 USD Consumer Price Index (YoY) (OCT)
November 19th 00.30 CAD Consumer Price Index (YoY) (OCT)