Australian Dollar
September’s labour market data bettered expectations, offering the ‘Aussie’ a fresh rallying point yesterday. Investors were surprised to find that the unemployment rate had fallen once again from 5.6% to 5.5%, indicating further tightening. Even so, this was largely fuelled by a sustained increase in part-time jobs, which somewhat undermined the positive implications for the wider economy. A slight dip in the NAB business confidence index also somewhat tempered the gains of AUD exchange rates.
In the absence of any fresh domestic data today the Australian Dollar is vulnerable to downside pressure, particularly if market risk appetite falters.
Sterling
UK retail sales data failed to impress, slumping -0.7% on the month in September as consumers reined in their spending. This does not paint a particularly encouraging picture of the domestic outlook, given that high levels of consumer spending have been a major driver of economic activity in recent months. Markets were inclined to reassess the odds of the Bank of England (BoE) raising interest rates in November, with the wage squeeze already seen to be eroding household finances.
Brexit-developments are likely to remain the key source of Pound volatility ahead of the weekend, although an improved public sector net borrowing figure could offer GBP exchange rates some support.
Euro
The single currency found support even as Spain prepared to trigger article 155 of its constitution and invoke direct rule over Catalonia. Markets saw this as a relatively positive sign, potentially reducing the risk of the region following through with its push for independence. Even though fresh conflict between the Spanish and Catalan administrations could stem from this move this possibility did not hamper the Euro as it trended higher against many of its rivals.
An uptick in German producer prices could boost hopes that inflationary pressure is strengthening within the Eurozone, giving the Euro further support today.
US Dollar
Although the US labour market continued to show signs of tightening, with jobless claims figures failing further than forecast, this was not enough to keep the ‘Greenback’ on a bullish footing. September’s leading indicators unexpectedly contracted by -0.2%, pointing towards some loss of momentum within the US economy. As strong Chinese growth data helped to encourage greater risk appetite amongst investors the US Dollar struggled to find any particular traction overnight.
Ahead of the latest comments from Federal Reserve Chair Janet Yellen, though, the downside potential of USD exchange rates is likely to remain limited.
Canadian Dollar
Demand for the ‘Loonie’ remained relatively weak overnight, even as hopes mounted for a positive renegotiation of the North American Free Trade Agreement (NAFTA). Even though market risk appetite generally strengthened on Thursday this failed to support oil prices, which slumped thanks to profit taking and ongoing supply worries.
However, the Canadian Dollar could find strong support tonight if the latest Canadian consumer price index shows another acceleration in inflationary pressure.
New Zealand Dollar
The ‘Kiwi’ plunged dramatically on Thursday in response to the announcement that Labour and New Zealand First will form a coalition government. With Bill English’s National party now ousted the political future is likely to remain somewhat uncertain in the near term, with the new government’s agenda yet to be confirmed. Market disappointment over this result saw NZD exchange rates shedding significant ground across the board, with weakness likely to persist in the coming days.
Even if New Zealand credit card spending is found to have picked up sharply in September this is unlikely to offer the ‘Kiwi’ any particular support today.
Data Released
October 20th 12:00 NZD Credit Card Spending (YoY) (SEP)
October 20th 16:00 EUR German Producer Prices (YoY) (SEP) 2.9%
October 20th 18:30 GBP Public Sector Net Borrowing (SEP) 5.7 billion
October 20th 22:30 CAD Consumer Price Index (YoY) (SEP) 1.7%
October 21st 09:30 USD Fed’s Yellen Speaks on Monetary Policy