Australian Dollar
Confidence in the ‘Aussie’ remained decidedly lacking at the start of the week, with investors still discouraged by the weakness of recent domestic data. The appeal of the commodity-correlated currency declined further in response to disappointing Chinese PMIs, which suggested that the world’s second largest economy is in a less robust state. Altogether there was little reason to favour the Australian Dollar on Monday, especially as September’s foreign reserves diminished on the month.
An uptick in the NAB business confidence index could offer AUD exchange rates some support this morning, even though market optimism in the domestic outlook remains limited.
Sterling
As there were no particular political developments over the weekend the Pound was able to regain some of its lost ground yesterday. While concerns remain over Theresa May’s ability to lead the fractious Conservative Party the threat of an imminent leadership challenge appeared to recede. This gave investors encouragement to pile back into Sterling, especially as markets remain confident in the prospect of a 2017 Bank of England (BoE) interest rate hike.
Even so, politics is likely to continue to dominate the mood towards the Pound this week, with the latest round of Brexit talks also in focus.
Euro
Germany continued to demonstrate signs of robust economic health as August’s industrial production figures showed a solid improvement, with an uptick of 2.6% on the month. This suggests that the Eurozone’s powerhouse economy remains in a solid state in spite of the uncertainty surrounding the makeup of the next government. The Euro also received something of a boost from a lack of fresh escalation in the Catalan crisis, even though the two sides remain distinctly at odds.
However, if the latest German trade balance fails to show a widening of the surplus this could weigh heavily on EUR exchange rates this afternoon.
US Dollar
Safe-haven demand helped to keep the ‘Greenback’ on a stronger footing against many of the majors, even in the absence of any fresh domestic data. Markets continued to shrug off the disappointing nature of Friday’s US labour market data, with confidence in the underlying strength of the economy persisting. As the Federal Reserve is still seen as being on course to raise interest rates once more before the end of the year the downside potential of USD exchange rates is still somewhat limited.
Although forecasts point towards a modest dip in the NFIB small business confidence index this is unlikely to particularly dent the US Dollar.
Canadian Dollar
As rigs in the Gulf of Mexico began returning to service in the wake of Hurricane Nate this limited the strength of oil prices. While there are hopes that the OPEC-led production agreement could be extended in order to keep global oil stocks in check this was not enough to boost the Canadian Dollar. With market risk appetite generally limited at the start of the week the ‘Loonie’ was unable to hold onto its earlier gains.
Tonight’s Canadian housing market data could offer CAD exchange rates a rallying point, however.
New Zealand Dollar
With coalition talks still ongoing the appeal of the New Zealand Dollar has remained rather lacking. Until there are signs of greater clarity over the shape of the next government then the ‘Kiwi’ is likely to remain out of favour with investors. As the appeal of higher-yielding currencies was generally limited on Monday the New Zealand Dollar lacked any particular traction against its rivals.
If September’s retail card spending data points towards improved consumer confidence, though, the ‘Kiwi’ may return to an uptrend.
Data Released
October 10th 07:45 NZD Card Spending Retail (MoM) (SEP) 0.7%
October 10th 10:30 AUD NAB Business Confidence Index (SEP)
October 10th 16:00 EUR German Trade Balance (AUG) 19.6 billion
October 10th 18:30 GBP Visible Trade Balance (AUG) -11.2 billion
October 10th 20:00 USD NFIB Small Business Optimism (SEP) 105
October 10th 22:30 CAD Building Permits (MoM) (AUG)