Australian Dollar
Although November’s commodity index showed a strong improvement on the month, this was not enough to shore up the ‘Aussie’ on Thursday. In large part this was due to a disappointing third quarter private capital expenditure figure, which undermined confidence in the robustness of the domestic economy. While the latest Chinese Manufacturing PMI bettered expectations, investor appetite for the commodity-correlated Australian Dollar remained limited, with markets still bracing for the Federal Reserve to raise interest rates imminently.
This morning’s retail sales data is unlikely to offer the ‘Aussie’ a rallying point, with forecasts pointing towards a slower increase in consumer spending on the month.
Sterling
Demand for the Pound rocketed overnight, driven higher by the latest developments in the Brexit saga. Brexit Secretary David Davis made comments suggesting that the UK could ultimately pay to retain its access to the single market, a prospect that was greeted enthusiastically by investors. As the stance of European officials also appeared to be softening somewhat, hopes of a less sharp break from the Union were boosted. Consequently Sterling was prompted to trend bullishly, making solid gains across the board.
Confidence could be knocked back ahead of the weekend, though, with the latest UK Construction PMI predicted to demonstrate a loss of momentum within the sector.
Euro
Despite the Eurozone unemployment rate falling below 10% to its lowest level since 2009, the appeal of the single currency remained limited. Even with this latest sign of improvement within the currency union political worries have continued to dominate the outlook. The re-run of the Austrian presidential election and the Italian constitutional referendum both pose risks of fresh political upsets and populist backlash. As a result markets have been reluctant to favour the Euro, diminishing the impact of this positive data.
Investor jitters are likely to keep the single currency on the back foot, although a rally could follow quickly on the heels of any more positive outcomes to the weekend’s votes.
US Dollar
The strength of the ‘Greenback’ was dented by disappointing jobless claims figures, which suggested that the labour market was not as robust as hoped. With the number of new claims for unemployment benefit rising 268,000 on the week, expectations for November’s Non-Farm Payrolls report weakened. While this is unlikely to deter the Federal Reserve from returning to the monetary tightening cycle at its last policy meeting of the year, USD exchange rates were nevertheless weighed down by disappointment.
If the number of jobs added to the world’s largest economy falls short of expectations then the US Dollar could shed further value, although its underlying trend remains bullish.
Canadian Dollar
Oil prices continued to rally strongly in response to OPEC’s momentous decision to cut production in conjunction with Russia, with prices expected to remain above the US$50 per barrel mark in the near future. The bullishness of Brent crude has helped to push the Canadian Dollar higher against many of its rivals, with the ‘Loonie’ still closely correlated to the commodity’s value.
However, this strength could be undermined by November’s Canadian employment data, which is forecast to show a drop in the number of those in employment.
New Zealand Dollar
The mood towards the ‘Kiwi’ was not positive on Thursday after the third quarter terms of trade index fell short of forecast. Instead of improving to 0.0% the index clocked in at -1.8%, indicating weaker demand for New Zealand exports. With market risk appetite generally limited this prompted investors to sell out of the higher-yielding New Zealand Dollar, driving it down across the board.
However, should the US employment data discourage confidence in the US Dollar then the ‘Kiwi’ could find some support.
Data Released
December 2nd 11:30 AUD Retail Sales (MoM) (OCT) 0.3%
December 2nd 20:30 GBP Construction PMI (NOV) 52.2
December 3rd 00:30 USD Change in Non-Farm Payrolls (OCT) 175,000
November 3rd 00:30 CAD Net Change in Employment (OCT) -20,000