Australian Dollar
While the Westpac leading index showed a modest uptick on the month in September the mood towards the ‘Aussie’ soured once again on Wednesday. A bullish US Dollar and market risk aversion weighed heavily on the antipodean currency, diminishing any positive impact from the domestic data. With markets also bracing for the latest raft of Australian labour market data there was little particular reason to favour the ‘Aussie’.
A dip in September’s participation rate could exacerbate the Australian Dollar’s softness, undermining confidence in the health of the domestic economy.
Sterling
Although average weekly earnings bettered expectations to rise 2.2% on the year in the three months to August this failed to boost the Pound. As wage growth continues to lag significantly behind inflation consumers are likely to come under increasing pressure. With high levels of consumer spending having been a major driver of the UK economy in recent months this could bode ill for growth in the coming months. Weak wage growth also raises questions over the wisdom of a November interest rate hike from the Bank of England (BoE).
If UK retail sales are found to have held up in September, though, GBP exchange rates may find a rallying point.
Euro
Eurozone construction output remained relatively strong in August, giving the Euro fresh support overnight. With signs continuing to point towards a robust level of growth within the domestic economy investors were encouraged to buy back into the single currency. Comments from European Central Bank (ECB) President Mario Draghi did not particularly weigh on the single currency, meanwhile. As Draghi continued to call for Eurozone leaders to implement greater structural reforms he made no real allusions to the ECB’s immediate policy outlook.
Political developments are likely to dominate sentiment today, with tensions between the Catalan and Spanish governments expected to heighten further.
US Dollar
Investors largely shrugged off the negative implications of September’s building permits and housing starts figures, even though both surprised to the downside. While the US housing market showed fresh signs of slowing the US Dollar remained on a generally bullish footing, as this weakness is thought to be largely the fault of the recent hurricanes. With market risk appetite still relatively weak there was little to keep the ‘Greenback’ from making fresh gains overnight.
Even so, softness in tonight’s Philadelphia Fed business outlook index and leading indicators may be enough to knock USD exchange rates off their uptrend.
Canadian Dollar
August’s manufacturing shipments data strongly bettered expectations, rebounding from -2.6% to 1.6%. This painted a more positive picture of the Canadian economy, encouraging CAD exchange rates to rally sharply in response. Even so, the chances of the Bank of Canada (BOC) returning to a hawkish outlook in the near future are still decidedly slim. With oil prices still elevated by concerns surrounding tensions between Iraqi forces and Kurds this gave the commodity-correlated Canadian Dollar an extra boost.
Ahead of Friday’s Canadian consumer price index data, however, the ‘Loonie’ may struggle to hold onto these gains for long.
New Zealand Dollar
Political worries continued to hamper the ‘Kiwi’, with markets still jittery in the absence of any confirmed coalition government. Speculation that the kingmaker New Zealand First party could be ready to declare its support for either a National or Labour government was not enough to boost the antipodean currency, however. Even if a government is announced shortly this may fail to give the New Zealand Dollar any significant boost, with uncertainty over future policy still remaining.
Any announcement is likely to provoke increased volatility for NZD exchange rates today.
Data Released
October 19th 10:30 AUD Unemployment Rate (SEP) 5.6%
October 19th 18:30 GBP Retail Sales (YoY) (SEP) 2.2%
October 19th 22:30 USD Philadelphia Fed Business Outlook (OCT) 22
October 20th 00:00 USD Leading Indicators (SEP) 0.1%