Australian Dollar
A new report from the International Monetary Fund (IMF) pressured the Australian Dollar lower yesterday. In its annual review of the Australian economy, the IMF noted that ‘consumption growth could turn lacklustre if wage growth stayed low’, while forecasting that interest rates needed to remain low in order to help the economy return to full employment. The Fund even suggested the recent storming performance from the economy may be down to ‘temporary factors’. Overall, this was bearish enough to dissuade investors from buying into the ‘Aussie’.
Considering yesterday’s IMF report warned about sluggish wage growth, investors will be interested to see today’s third-quarter wage cost index.
Sterling
Two major headwinds for Pound Sterling allowed the Australian Dollar to edge ahead. Firstly, a leaked memo supposedly for the Cabinet Office revealed that the government still has no plan regarding the Brexit. Secondly, October’s consumer price index data revealed that price growth actually slowed last month. This lowered trader hopes that the Bank of England (BoE) might be prompted to raise interest rates in the near-term.
With economists still warning inflation is set to spike, markets will be watching the latest weekly earnings figures with interest.
Euro
The Euro was largely bullish yesterday. The global bond sell-off seen over the past few days could prove to be a shot in the arm for the struggling Eurozone banking sector. This is because the sell-off is lowering bond prices; banks hold lots of bonds and so, when the assets they hold mature, it is cheaper for them to reinvest in new bonds. This could improve their profitability, making them less susceptible to the negative effects of loose European Central Bank (ECB) monetary policy.
A speech from the ECB’s Knot is due this evening.
US Dollar
The US Dollar remained strong against many of its currency peers yesterday. Markets continued to hope that Donald Trump’s spending plans would boost the US economy and cause the Federal Reserve to raise interest rates. Bets of a December hike were now at nearly 91%. At the same time, investors were beginning to turn their attention to other policies suggested by the Republican President-elect. His intention to deport around three million undocumented migrants as soon as he comes to power is potentially problematic; research has shown that the 8 million unregistered immigrants in the US will contribute US$5 trillion (3% of private sector GDP) to the economy over the next decade.
It is likely political forces will continue to move the US Dollar today. The most important release on the economic calendar – the US mortgage applications for the week ending November 11th – is therefore unlikely to have much impact.
Canadian Dollar
Expectations that the Organisation of the Petroleum Exporting Countries (OPEC) would agree a deal to cut oil production fuelled crude prices higher yesterday. WTI was up 3.1% at one point during the session, while Brent managed to clock up gains of 2.9%. Markets were particularly cheered by the news that Iran was apparently considering cooperating in the cut; the initial deal was thought to have excluded Iran and even allowed for the nation to continue upping its oil output.
No Canadian data is set for publication today.
New Zealand Dollar
The New Zealand Dollar continued to be hit by concerns of further disasters after the recent earthquakes, including a magnitude 7.5 quake and hundreds of aftershocks which are still ongoing, hit the South Island. Two people were killed and there have been warnings of further quakes, as well as potential tsunamis. A 4.5% rise in the average winning price at the latest Global Dairy Trade auction understandably failed to grab the attention of markets.
There is no data due from New Zealand today.
Data Released
November 16th 11.30 AUD Wage Cost Index (YoY) (3Q)
November 16th 18.00 EUR ECB’s Knot Speaks at UBS European Conference in London
November 16th 20.30 GBP Weekly Earnings ex Bonus (3M/YoY) (SEP)
November 16th 23.00 USD MBA Mortgage Applications (NOV 11)