Australian Dollar
Domestic lending data proved largely positive yesterday, boosting the Australian Dollar across the board. Investors were also encouraged by a solid uptick in October’s consumer inflation expectation figure, which accelerated from 3.8% to 4.3%. This could give the Reserve Bank of Australia (RBA) incentive to consider returning to a monetary tightening bias, with rising inflationary pressure likely to squeeze consumers and economic growth if left unchecked.
The RBA’s latest Financial Stability Review could provoke weakness for the ‘Aussie’, though, if the tone of the report proves more cautious.
Sterling
Demand for the Pound weakened sharply on Thursday in response to the closing press conference that marked the end of the latest round of Brexit negotiations. Markets were spooked by comments from chief EU negotiator Michel Barnier, who noted that talks have hit a ‘deadlock’. With tangible progress still decidedly lacking investors remain frustrated, leaving Sterling to trend lower against its rivals overnight.
Political headwinds are likely to persist ahead of the weekend, keeping GBP exchange rates on a generally softer footing.
Euro
Better-than-expected Eurozone industrial production figures improved the appeal of the single currency, with output rising 3.8% on the year in August. Naturally this bolstered confidence in the domestic outlook, coming in the wake of various positive German data. However, the Euro struggled to hold onto any particular traction as tensions in the Catalan crisis still have the potential to boil over.
No change is expected for the finalised German consumer price index, which could offer some degree of support to the Euro this afternoon.
US Dollar
Markets were a little surprised to find that a number of Fed policymakers had expressed concerns over weak inflation in the central bank’s September meeting minutes. While this was not enough to dent the odds of an imminent interest rate hike there are worries that monetary tightening could still adopt a less aggressive pace. A marked decline in jobless claims offered some support to the ‘Greenback’, though, indicating a continued tightening of the US labour market.
An uptick in tonight’s consumer price index could give the US Dollar another strong rallying point, even though this is not the Fed’s preferred measure of inflation.
Canadian Dollar
In another negative sign for the Canadian housing market the latest new housing price index slowed further than anticipated on the month. The Canadian Dollar weakened as a result, with signs still pointing towards the Bank of Canada (BOC) remaining on hold for the foreseeable future. An increase in US crude oil stockpiles also weighed on the ‘Loonie’, undoing some of oil’s recent bullish gains.
In the absence of any fresh Canadian data CAD exchange rates look likely to remain under pressure today.
New Zealand Dollar
Even though New Zealand food prices showed a contraction of -0.2% in September this failed to particularly weigh on the ‘Kiwi’. While this suggests that inflationary pressure within the New Zealand economy is struggling to pick up markets largely shrugged off this disappointing showing. With risk appetite buoyed by the more dovish tone of the Fed minutes the New Zealand Dollar was instead encouraged to make fresh gains.
If September’s manufacturing PMI points towards stronger growth within the sector this could help the ‘Kiwi’ to extend its gains further.
Data Released
October 13th 07:30 NZD Manufacturing PMI (SEP)
October 13th 10:30 AUD RBA Financial Stability Review
October 13th 16:00 EUR German Consumer Price Index (YoY) (SEP F) 1.8%
October 13th 22:30 USD Consumer Price Index (YoY) (SEP) 2.3%
October 13th 22:30 USD Advance Retail Sales (SEP) 1.7%