Australian Dollar
The Australian Dollar took a huge hit yesterday after a shock collapse in building approvals during October. Month-on-month approvals tumbled -12.6% instead of recovering from a downwardly-revised 9.3% in September to 2% as forecast. Year-on-year figures proved even worse; September’s downwardly-revised -6.8% slump swelled to a -24.9% tumble. The Reserve Bank of Australia (RBA) is already concerned about the overheating housing market and such a significant drop in home building is only going to cook prices further. The ‘Aussie’ unsurprisingly slumped across the board.
The AiG performance of manufacturing index for November will be the most impactful of today’s smattering of Australian ecostats. However, investors could overlook all of these due to the Chinese manufacturing PMI scheduled for release at midday.
Sterling
AUD/GBP exchange rates slumped yesterday, although elsewhere the Pound was on mixed form. Sterling had little momentum of its own, instead responding to strength or weakness in other currencies. The Bank of England (BoE) released its latest Financial Stability Report, which failed to overly influence GBP trade in one direction or the other. On a positive note, BoE Governor Mark Carney noted that the UK’s financial system was strong enough to deal with a shock scenario. However, traders were unsettled by news that the largely taxpayer-owned Royal Bank of Scotland had failed the BoE’s stress tests.
Today’s Markit manufacturing PMI for November will help to give a further gauge of how well the UK economy has performed in the wake of the vote to leave the European Union.
Euro
The Euro was weak overall yesterday despite Eurozone inflation reaching a two-and-a-half-year high. German unemployment also printed positively, showing a -5,000 decrease in the number of people without jobs. However, the day’s headline results were exactly as had been forecast, giving investors little extra information to work with. Also, given the day’s volatility in the oil market, the safe Euro wasn’t a particularly appealing bet. Rising oil prices were also likely the reason for the acceleration in non-core consumer price index growth, suggesting the Eurozone’s fundamentals remain unchanged.
Numerous Eurozone reports are due for release today, including finalised manufacturing PMIs and the Eurozone unemployment rate.
US Dollar
The US Dollar has been on largely bullish form recently, helped by this morning’s consistent personal consumption figures. Personal consumption is the Federal Reserve’s preferred measure of inflation, so the fact it remained at 0.1% month-on-month and 1.7% year-on-year helped inch market odds of a Federal Reserve rate hike this month up to 94%. The ADP employment change figure for November, often wrongly used as an indicator of the performance of non-farm payrolls data (which is due on Friday), registered significantly above-forecast jobs growth of 216,000. Analysts had expected 170,000 people would have found employment.
The US ISM manufacturing index is set for release early tomorrow morning and could support the US Dollar further due to forecasts for an edge higher to 52.2 from 51.9.
Canadian Dollar
Strong domestic data and surging crude oil prices helped lift the Canadian Dollar higher yesterday. Although bullish, the ‘Loonie’ did not register the kinds of gains that might have been expected as strong rumours from OPEC indicated that the cartel had agreed to cut oil production. At one point WTI and Brent were both advancing over 8%, with Brent climbing above US$50 per barrel. With GDP advancing to 1.9% year-on-year in September and to 3.5% in the third quarter – ten basis points above forecasts in both cases – the outlook for the Canadian Dollar was looking much rosier.
The RBC Canadian manufacturing PMI will be released early tomorrow morning.
New Zealand Dollar
Although the New Zealand Dollar was able to register strong gains versus the Australian Dollar, elsewhere the ‘Kiwi’ slumped. Domestic data was disappointing, with the ANZ activity outlook dipping from 38.4 to 37.6, while the NBNZ business confidence reading dropped from 24.5 to 20.5. The M3 money supply was more promising, with growth accelerating from 4.8% to 7.1%. This significant increase in the amount of money in circulation could indicate that inflationary pressures are set to build notably in the coming months. Regardless, the frenzy of market speculation regarding crude oil left little appetite for the New Zealand Dollar.
The latest New Zealand terms of trade index is expected to have stagnated on the previous month.
Data Released
December 1st 08.45 NZD Terms of Trade Index (QoQ) (3Q) 0.0%
December 1st 09.30 AUD AiG Performance of Manufacturing Index (NOV)
December 1st 12.00 CNY Manufacturing PMI (NOV) 51
December 1st 20.30 GBP Markit UK PMI Manufacturing s.a. (NOV) 54.3
December 1st 21.00 EUR Eurozone Unemployment Rate (OCT) 10.0%
December 2nd 01.30 CAD RBC Canadian Manufacturing PMI (NOV)
December 2nd 02.00 USD ISM Manufacturing (NOV) 52.2