Australian Dollar
A decent uptick in the ANZ Roy Morgan weekly consumer confidence index was not enough to particularly shore up the Australian Dollar yesterday. With market risk appetite still largely limited by the bullishness of the US Dollar investors saw little reason to buy back into the antipodean currency at this juncture. Anticipation ahead of today’s third quarter consumer price index data also reduced demand for the ‘Aussie’.
If inflation is found to have strengthened in the third quarter as forecast this could see the Australian Dollar trending higher across the board, even though the odds of any imminent Reserve Bank of Australia (RBA) policy change remain slim.
Sterling
GBP exchange rates came under further pressure overnight thanks to commentary from Bank of England (BoE) deputy governor Jon Cunliffe. Markets were discouraged by the more cautious nature of Cunliffe’s words, which suggested that he might not be prepared to vote for an interest rate hike in November. This weighed heavily on the Pound, even though several other members of the Monetary Policy Committee (MPC) are still expected to opt to tighten monetary policy imminently.
The mood towards Sterling could sour further if the third quarter UK gross domestic product data indicates that the economy has continued to lose momentum.
Euro
While the individual Eurozone manufacturing and services PMIs proved somewhat mixed this was not enough to dampen the mood towards the single currency. On the whole the data painted an encouraging picture of the domestic economy, indicating that the currency union continues to experience solid growth. As this resilient data bodes well for the fourth quarter gross domestic product data this naturally offered the Euro a strong boost against its rivals.
Although October’s German IFO business sentiment surveys are expected to show a slight dip on the month this is unlikely to particularly dent the Euro.
US Dollar
Better-than-expected US manufacturing and services PMIs helped to extend the bullish run of the US Dollar, improving confidence in the underlying strength of the US economy. This diminished the impact of a weaker Richmond Fed manufacturing index, with signs still pointing towards the Federal Reserve opting to raise interest rates again before the end of the year. Continued optimism over the prospect of the Trump administration pushing through at least some of its promised tax reforms also supported USD exchange rates.
Even so, as durable goods orders are forecast to have slowed somewhat in September this could temper the strength of the ‘Greenback’ tonight.
Canadian Dollar
Comments from Saudi Arabia continued to support a bullish oil market, with the major exporter reiterating its determination to end the global oversupply glut. This suggests that the OPEC-led production limiting agreement is likely to run for some time yet, keeping a floor under oil prices for the foreseeable future. Confidence in the commodity-correlated Canadian Dollar improved as a result.
Ahead of the Bank of Canada’s (BOC) October policy decision the appeal of the ‘Loonie’ is likely to weaken once again, however.
New Zealand Dollar
As the details of the new coalition continued to emerge the appeal of the ‘Kiwi’ remained relatively limited. Investors were not impressed by news that the Labour-led government will be pursuing a reform of the Reserve Bank Act, potentially altering the remit of the Reserve Bank of New Zealand (RBNZ). Coupled with a number of other social policies, such as increasing the minimum wage, this failed to alleviate the general sense of market scepticism.
In the absence of any fresh domestic data the New Zealand Dollar remains at the mercy of political developments today.
Data Released
October 25th 10:30 AUD Consumer Price Index (YoY) (3Q) 2.0%
October 25th 18:00 EUR German IFO Business Climate (OCT) 115.1
October 25th 18:30 GBP Gross Domestic Product (QoQ) (3Q) 0.3%
October 25th 22:30 USD Durable Goods Orders (SEP P) 1.0%
October 26th 00:00 CAD Bank of Canada Rate Decision 1.0%