Australian Dollar
An unexpected contraction in retail sales weighed heavily on the ‘Aussie’, with a second consecutive month of weakness denting confidence in the Australian economy. This disappointing showing overshadowed a larger-than-expected widening of August’s trade surplus, leaving the Australian Dollar on a weaker footing across the board. Strong US data and heightened expectations for an imminent Federal Reserve interest rate hike also limited the appeal of the antipodean currency yesterday.
Another weak showing from this morning’s construction PMI could leave AUD exchange rates vulnerable to further softness.
Sterling
Continuing speculation over Theresa May’s position, following her fraught Conservative Party conference speech, limited the appeal of the Pound. This ongoing sense of political instability, coupled with persistent worries over Brexit, has given investors little cause for confidence in Sterling. A sharp drop in new car sales in September also put pressure on GBP exchange rates, highlighting the continued vulnerability of the domestic economy.
Further signs of weakness from the UK housing sector could erode the appeal of the Pound tonight, particularly as confidence in the prospect of an imminent Bank of England (BoE) interest
rate hike diminishes.
Euro
The European Central Bank’s (ECB) September meeting minutes did not show any particular shift in opinion amongst policymakers, suggesting that the push towards tighter monetary policy remains limited. Mounting worries over the situation in Catalonia also weighed heavily on the single currency overnight, as Spain’s constitutional court suspended Monday’s planned Catalan parliament session. This appeared to be a move to head off a potential unilateral declaration of independence, with no peaceful resolution to the crisis appearing to be in sight.
Even so, a stronger showing from August’s German factory orders data could offer EUR exchange rates a rallying point.
US Dollar
As US jobless claims fell further than forecast on the week this offered the US Dollar a fresh boost last night. In the wake of hawkish comments from San Francisco Fed President John Williams, even though he is not a voting member of the Federal Open Market Committee (FOMC) this year. Nevertheless, the signs continue to point towards another interest rate hike coming before the end of the year, boosting the ‘Greenback’ higher against its rivals.
However, significant volatility could be in store for the US Dollar tonight if September’s raft of labour market data falls short of forecasts.
Canadian Dollar
August’s Canadian trade data did little to impress markets, with the trade deficit found to have widened further than forecast from -2.9 billion to -3.4 billion. This further undermined confidence in the outlook of the domestic economy, giving the Bank of Canada (BOC) more reason to leave interest rates on hold. While oil prices remained on a bullish run thanks to speculation over the possibility of further OPEC production cuts this was not enough to shore up the Canadian Dollar.
The ‘Loonie’ could shed further ground ahead of the weekend if the latest Canadian labour market data fails to point towards continued tightening.
New Zealand Dollar
In the absence of any particular sense of market risk appetite the ‘Kiwi’ lacked significant momentum against many of the majors. With fresh domestic data lacking and a sense of political uncertainty still clouding the outlook there was little reason to buy into the New Zealand Dollar on Thursday.
Even so, the relative weakness of the Australian Dollar may keep the AUD NZD exchange rate on a softer footing today.
Data Released
October 6th 08:30 AUD Construction PMI (SEP) 53.5
October 6th 16:00 EUR German Factor Orders (YoY) (AUG) 4.7%
October 6th 17:30 GBP Halifax House Price (3MoY) (SEP)
October 6th 22:00 GBP BoE’s Haldane Speaks in London
October 6th 22:30 CAD Net Change in Employment (SEP) 12,000
October 6th 22:30 USD Change in Non-farm Payrolls (SEP) 80,000