Australian Dollar
Demand for the ‘Aussie’ plunged sharply as the third quarter consumer price index data undershot market expectations. Investors were disappointed as inflationary pressure dipped from 1.9% to 1.8% on the year, rather than rising to 2.0% as forecast. This will give the Reserve Bank of Australia (RBA) more reason to leave interest rates on hold for some time to come, undoing much of the positive impact of recent positive data.
With the latest Australian import and export price index data expected to paint a similarly muted picture of the economic outlook AUD exchange rates are likely to remain on a weaker footing today.
Sterling
Markets reacted with excitement to news that UK growth had picked up from 0.3% to 0.4% in the third quarter, bettering forecasts for a steady reading. While this is still some way short of the long-term average this modest uptick in the gross domestic product encouraged the Pound to trend sharply higher across the board. As this was better than the Bank of England’s (BoE) quarterly forecast the odds of a November interest rate hike naturally rose to a state of near-certainty.
As the CBI retailing reported sales index is expected to show a significant dip on the month, though, Sterling may struggle to hold its gains for long.
Euro
Confidence in the Euro remained generally high overnight, with the German IFO business sentiment surveys adding to the positive mood. Rather than the modest decline that was predicted domestic sentiment strengthened sharply, with the business expectations measure jumping from 107.5 to 109.1 in October. With the Eurozone’s powerhouse economy continuing to demonstrate solid signs of growth the outlook for the currency union as a whole remains distinctly positive.
However, the mood towards the single currency is likely to soften in anticipation of the European Central Bank (ECB) policy meeting and the latest developments in the Catalan crisis.
US Dollar
Durable goods orders unexpectedly jumped 2.2% on the month in September, offering a fresh indication of the robust state of the US economy. Continued signs of growth within the domestic housing market also helped to keep the US Dollar on a bullish trend. The persistent sense of market risk aversion offered further support to the ‘Greenback’, which has benefitted from the weakness of higher-yielding rivals.
Even so, if September’s advance goods trade balance shows a widening of the deficit this could dent the appeal of the US Dollar.
Canadian Dollar
Although markets did not expect otherwise the Canadian Dollar still slumped sharply in response to the Bank of Canada’s (BOC) decision to leave interest rates on hold. The latest Monetary Policy Report did not do anything to encourage investors, taking a rather more cautious note than hoped. A surprise uptick in US crude oil inventories put further pressure on the ‘Loonie’, driving it lower against many of the majors overnight.
With fresh domestic data lacking today CAD exchange rates may struggle to find any particular traction.
New Zealand Dollar
Enthusiasm for the ‘Kiwi’ continued to lack on Wednesday as markets remained unimpressed by the domestic political outlook. With demand for higher-yielding currencies still generally limited there was little reason to buy into the New Zealand Dollar. Even so, the softness of its commodity-correlated rivals enabled the ‘Kiwi’ to recover some measure of ground.
The mood of NZD exchange rates could improve this morning, though, if September’s New Zealand trade data points towards a stronger domestic economy.
Data Released
October 26th 07:45 NZD Trade Balance (SEP) -900 million
October 26th 10:30 AUD Import Price Index (QoQ) (3Q) -1.5%
October 26th 10:30 AUD Export Price Index (QoQ) (3Q) -4.0%
October 26th 20:00 GBP CBI Retailing Reported Sales (OCT) 14
October 26th 21:45 EUR European Central Bank Rate Decision 0.0%
October 26th 22:30 USD Advance Goods Trade Balance (SEP) -64 billion