Australian Dollar
The Australian Dollar made strong gains yesterday, but softened towards the end of the day, after the Reserve Bank of Australia’s (RBA) latest monetary policy meeting. Although the Board left interest rates on hold at 1.50% and signalled that they were in no rush to hike borrowing costs, markets took this as a sign that the next move for interest rates would definitely be up. This was enough to encourage traders to buy into AUD.
Australian third-quarter GDP figures are set for release this morning; a small slowdown on the quarter is forecast, but given the recent optimism from the RBA this may not weigh heavily on the ‘Aussie’.
Sterling
AUD/GBP made significant gains yesterday as the issue of the Irish border caused a roadblock for Brexit talks. Northern Ireland’s DUP, who support Theresa May in Parliament, have refused to accept a deal that involves Northern Ireland staying in the customs union, but the EU and Irish Parliament don’t want a hard border between Northern Ireland and the Republic. Unless May can quickly find a solution that appeases both parties, it seems unlikely the UK can get the EU to advance talks onto the topic of trade.
Euro
Some disappointing domestic data weighed on the Euro yesterday, while a reawakening of market risk-appetite further inspired the EUR sell-off. Germany’s finalised composite and services PMIs were revised slightly lower and Eurozone retail sales posed a worse-than-expected slump on the month in October, falling -1.1% instead of the forecast -0.7%. Year-on-year sales grew just 0.4% – a quarter of the rate economists had anticipated.
Eurozone retail PMIs will be the highlight of tomorrow’s data calendar for the currency bloc.
US Dollar
The Australian Dollar made gains versus the US Dollar, although elsewhere the ‘Greenback’ was able to make minor advances versus its peers. USD was still receiving some support from the recently-passed tax reform bill, although the day’s data proved disappointing. October’s trade deficit was larger-than-expected and the ISM non-manufacturing composite index for November dropped from 60.1 to 57.4 instead of to the projected 59.
US ADP employment figures are set for release this evening. Markets use these as an indicator for the performance of Friday’s more influential non-farm payrolls report, despite there being little correlation. Forecasts for a sharp slowdown could therefore mean USD is in for a fall.
Canadian Dollar
Risk appetite helped push the Canadian Dollar higher, although its commodity peers benefitted more from the market move away from safe-havens. The latest international merchandise trade figures proved supportive, showing a deficit of –C$1.47 billion; just over half the shortfall expected.
The Canadian Dollar is likely to spend much of today on soft form as markets brace for tomorrow morning’s interest rate decision from the Bank of Canada (BOC).
New Zealand Dollar
Although dairy prices only rose 0.4% at the latest Global Dairy Trade event, this was enough to push the New Zealand Dollar higher. Prices have declined markedly over the past four events, so the simple fact that trend didn’t continue has cheered markets.
Data Released
December 6th 10.30 AUD Gross Domestic Product (YoY) (3Q) 3.0%
December 6th 19.10 EUR Markit Germany Retail PMI (NOV)
December 6th 23.15 USD ADP Employment Change (NOV) 190k
December 7th 01.00 CAD Bank of Canada Rate Decision (DEC 06) 1.00%