Australian Dollar
Although Chinese producer prices jumped sharply on the year in September this was not enough to shore up the ‘Aussie’ at the start of the week. While this latest sign of strength from the world’s second largest economy encouraged greater confidence in the global outlook the mood towards the Australian Dollar still soured. With investors expecting another dovish set of Reserve Bank of Australia (RBA) meeting minutes this morning AUD exchange rates struggled to gain any traction.
If the minutes reaffirm the RBA’s intention to sit tight on monetary policy for the foreseeable future then the Australian Dollar is likely to cede further ground.
Sterling
Speculation over Brexit continued to dominate the outlook of the Pound on Monday, even after a better-than-expected Rightmove house price index. Although markets were initially reassured by news that Theresa May will be meeting with chief EU negotiator Michel Barnier and European Commission President Jean-Claude Juncker this boost did not last long. Investors were instead spooked by reports that the UK government is braced for talks to break down without the EU compromising, weighing down GBP exchange rates once again.
A rallying point could be in store for Sterling, though, if UK inflation is found to have accelerated to 3% on the year in September.
Euro
Demand for the single currency was somewhat mixed, even though the latest Eurozone date proved largely positive. While the German wholesale price index pointed towards rising inflationary pressure within the Eurozone’s powerhouse economy this failed to significantly buoy the Euro. A disappointing narrowing of the Eurozone trade surplus instead put pressure on EUR exchange rates, undermining confidence in the domestic outlook. Developments in the Catalan crisis also encouraged investors to sell out of the Euro, with local tensions showing no real signs of easing.
An uptick in the German ZEW economic sentiment survey for October may offer some support to the single currency this afternoon.
US Dollar
The Empire manufacturing index rose markedly on the month, rising from 24.4 to 30.2 as the sector continued to strengthen. This helped to shore up the US Dollar even as the general sense of market risk appetite improved, with investors still betting on the prospect of an imminent Federal Reserve interest rate hike. A sense of increased political risk limited the upside potential of the ‘Greenback’, though, with confidence in the Trump administration’s push for tax reforms somewhat limited.
Even so, with US industrial production forecast to have rebounded in September USD exchange rates are likely to maintain some degree of support overnight.
Canadian Dollar
Rising tension in Iraq helped to boost oil prices once again, with government forces reported to be pushing into the oil-rich Kurdish city of Kirkuk. As this threatens to disrupt local oil production the price of Brent crude leapt above the US$58 per barrel mark. However, the commodity-correlated Canadian Dollar failed to take advantage of this bullish development.
Even so, any weakness in the oil market is still likely to keep the ‘Loonie’ under pressure today.
New Zealand Dollar
While the New Zealand services PMI dipped slightly on the month the index still remained firmly in growth territory. As a result, the mood towards the ‘Kiwi’ remained positive as confidence in the underlying health of the domestic economy persisted. The strength of the latest Chinese inflation data also offered encouragement to NZD exchange rates, especially as the sense of domestic political uncertainty started to ease.
Another strong showing from this morning’s third quarter consumer price index data may prompt the New Zealand Dollar to extend its gains further.
Data Released
October 17th 07:45 NZD Consumer Price Index (YoY) (3Q) 1.8%
October 17th 10:30 AUD RBA Meeting Minutes (OCT)
October 17th 18:30 GBP Consumer Price Index (YoY) (SEP) 3.0%
October 17th 19:00 EUR German ZEW Economic Sentiment Survey (OCT) 20
October 17th 23:15 USD Industrial Production (SEP) 0.2%