Australian Dollar
The Australian Dollar softened yesterday after the Reserve Bank of Australia (RBA) held interest rates at 1.5%. Although this had been predicted, markets didn’t interpret the move as a vote of confidence in the Australian economy. The accompanying statement noted that GDP growth was likely to have slowed towards the end of the year and that inflation expectations remained subdued, with business investment weak. Investors expect the RBA are simply on hold until the next policy meeting, by which point the US Federal Reserve will likely have hiked interest rates, Donald Trump will have been inaugurated as US President and the latest Australian GDP data will have been released.
The Australian Dollar could be facing strong headwinds today as the upcoming Q3 gross domestic product figure is expected to slow from 3.3% year-on-year to 2.2%.
Sterling
The Australian Dollar to Pound exchange rate slumped yesterday, with the Pound finding support from market confidence over the outcome of the ongoing Supreme Court hearing. Although only in its second day, investors were of the belief that the government’s appeal to a previous High Court ruling on Article 50 would be overturned. This would mean that Parliament would indeed be given a say on the government’s negotiating plans when leaving the EU. Investors largely interpret this to mean that MPs would force the government to prioritise single market access, not immigration, thereby limiting economic damage caused by the UK’s withdrawal from the union.
UK industrial and manufacturing production data is due for release this evening.
Euro
The Euro was largely soft yesterday, weighed down by continued uncertainty following the Italian referendum and a mixed data docket. There were rumours that the government would be able to bail out the banks without hitting pension funds, but there were also suggestions that there could be general elections in February 2017. German factory orders showed strong growth, but the German, French, Italian and Eurozone-wide retail sectors all remained in contraction.
German industrial production figures for October are set for release today.
US Dollar
Fed rate hike bets may have edged lower, from 94.9 to 92.7, but the US Dollar was advancing yesterday. Factory orders, labour costs and durable goods orders data all printed well, with the latter being revised down just -0.2% to 4.6% rather than to 3.4% as forecast. Productivity also rose 3.1% – its strongest gain in two years, helping to further strengthen the underlying view of the US economy that will influence the Federal Reserve when it makes its next policy decision.
MBA mortgage applications data for the week ending December 2nd is set for release this evening.
Canadian Dollar
The Canadian Dollar was on mixed form yesterday as numerous headwinds and tailwinds jostled for priority. The international merchandise trade balance deficit fell even further than forecast, shrinking from -4.38 billion to -1.13 billion. However, the Ivey purchasing managers index unexpectedly weakened from 59.7 to 56.8, instead of rising to 60 as predicted. Meanwhile, analysts claimed that the Bank of Canada (BOC) would make no monetary policy changes until the beginning of 2018. While this limits upside risks to the ‘Loonie’, it also lessens the chances of a move to weaken the Canadian Dollar.
There is no Canadian data set for release today.
New Zealand Dollar
The New Zealand Dollar continued to be weakened by the shock resignation of New Zealand Prime Minister John Key earlier in the week. Until it is known who will replace him, it is likely the ‘Kiwi’ will continue to be weighed down by political uncertainty in the coming days. A 3.5% rise in the Global Dairy Trade Price Index following the latest auction helped lessen the New Zealand Dollar’s losses, however.
Low impact manufacturing data could support the ‘Kiwi’ slightly today, although the political situation may prove to be the more dominant factor affecting New Zealand Dollar exchange rates.
Data Released
December 7th 08.45 NZD Manufacturing Activity (3Q)
December 7th 11.30 AUD Gross Domestic Product (YoY) (3Q) 2.2%
December 7th 18.00 EUR German Industrial Production n.s.a. and w.d.a. (YoY) (OCT) 1.6%
December 7th 20.30 GBP Industrial Production (YoY) (OCT) 0.5%
December 7th 23.00 USD MBA Mortgage Applications (DEC 2)