Australian Dollar
Iron ore continued rallying yesterday, supporting strong gains for the Australian Dollar. New plans from leading Australian iron miner Rio Tinto to cut costs and boost profitability have also supported the Australian Dollar. Rio Tinto, an FTSE 100 company, is currently making solid progress towards its target of delivering cost savings of AU$2 billion and has announced plans to boost profitability by AU$5 billion over the course of the next half-decade. The strength of iron ore prices this year, which have rallied nearly 75%, has already helped the company reduce its debt pile by -6.5% to -AU$12.9 billion.
Sterling
The Australian Dollar was able to edge higher versus the Pound yesterday, with Sterling softened by a damning verdict on Chancellor Philip Hammond’s Autumn Statement. The respected Institute for Fiscal Studies (IFS) concluded that British workers were set for their biggest pay squeeze in 70 years because of Brexit. While this is partly due to rising inflation, which would indicate a need for tighter monetary policy, the Bank of England (BoE) has already said it will look past rising prices as a result of Sterling depreciation. With the BoE looking past inflation to the fundamentals of the economy – and weakening wages likely to dampen consumer activity – there may be little to prompt policymakers to call for tighter US interest rates.
UK gross domestic product figures for the third quarter are set for release today. Preliminary expansion estimates are forecast to clock in at 0.5% on the quarter and 2.3% on the year; a slowdown and an acceleration respectively.
Euro
The Euro was on mixed form yesterday, weakening against the Australian Dollar due to surging iron ore prices supporting ‘Aussie’ gains. Eurozone data offered positives and negatives, keeping investors on the back foot. Finalised German GDP figures for Q3 printed without any downside shocks, while German government spending slowed only marginally. But capital investment and construction investment disappointed projections, while the business climate and expectations Ifo surveys both weakened. This meant that, while the backwards-looking indicators of Germany’s economic health were positive, the future was not necessarily looking so rosy.
US Dollar
US markets were closed for the Thanksgiving Holiday, which saw the US Dollar slump across the board due to thin trading volumes. Fed hike bets remained high, however, while key US data is due for release early on Saturday, indicating the US Dollar is probably in for a swift recovery.
Canadian Dollar
The Canadian Dollar was largely weak yesterday, despite crude oil manging to hold around strong levels. There were mixed messages from oil producers regarding the upcoming OPEC meeting to try and agree a production cut. Saudi Arabia was allegedly intending to press for the steepest possible production cuts which, if producers outside the cartel can be persuaded to participate in, could reduce global oil supplies by -2%. However, Russia firmly reiterated the fact it was prepared only to freeze production, not to cut it. This kept the likely outcome of the meeting uncertain, weakening the ‘Loonie’.
New Zealand Dollar
With the minutes from the latest US Federal Open Market Committee (FOMC) indicating that the majority of Fed members were in favour of an interest rate hike, there was little appetite for the risky New Zealand Dollar yesterday. The ‘Kiwi’ slumped which, according Westpact Market Strategist Imre Speizer, was ‘nothing to do with the Kiwi. It’s all to do with the US Dollar which has been strong, higher. All the currencies have fallen into line with that.’
New Zealand trade balance figures are set for release this morning.
Data Released
November 25th 08.45 NZD Trade Balance (New Zealand dollars) (OCT)
November 25th 20.30 GBP Gross Domestic Product (QoQ) (3Q P) 0.5%
November 25th 20.30 GBP Gross Domestic Product (YoY) (3Q P) 2.3%