- Strong US Growth Dents Australian Dollar Demand – Risk aversion drags on AUD exchange rates once again
- Pound Sees Limited Movement Ahead of UK Budget – Weaker mortgage and consumer credit data may weigh GBP down
- ECB Forecasters Lower 2018 and 2019 Growth and Inflation Forecasts – Euro remains vulnerable to Italian budget dispute
- US Dollar Strengthens as Third Quarter GDP Beats Expectations – Signs still point towards December Fed interest rate hike
Australian Dollar Weakens in Face of US Growth
Markets returned to a bearish mood on Friday, in part thanks to stronger-than-expected US growth data. This left the Australian Dollar on a weaker footing once again, with investors lacking any incentive to favour the antipodean currency over its rivals. As markets anticipate the Reserve Bank of Australia (RBA) staying on hold for the foreseeable future the ‘Aussie’ slumped, leading the AUD/USD exchange rate to fall to a 32-month low.
With the calendar still lacking in Australian data AUD exchange rates could struggle to recover any particular ground today.
Pound Lacks Momentum Ahead of UK Budget
The Pound struggled to find any particular momentum ahead of the weekend thanks to the absence of any fresh domestic data. With Brexit-based uncertainty and political tensions dominating the domestic outlook GBP exchange rates remained under pressure. Mounting anticipation ahead of tonight’s UK budget announcement also helped to limit the movement of the Pound as investors weighed up the chances of Chancellor Philip Hammond boosting spending.
September’s mortgage approvals and net consumer credit data are likely to provoke additional volatility for the Pound.
Euro Wobbles After ECB Survey Cuts Growth Forecasts
The latest European Central Bank (ECB) survey of professional forecasters did not paint a particularly encouraging picture, with growth and inflation forecasts for 2018 and 2019 revised lower. With confidence in the underlying health of the Eurozone economy already limited these weaker forecasts may undermine ECB sentiment. However, as ECB President Mario Draghi reiterated his cautiously optimistic outlook in comments on Friday this helped to limit any negative impact on the Euro.
Even so, the mood towards the single currency could easily deteriorate again in response to any developments in the Italian budget dispute.
Solid Third Quarter Growth Boosts USD Exchange Rates
While the third quarter saw the US economy lose momentum the weakness proved more limited than forecast, giving the US Dollar a boost against its rivals. As the annualised gross domestic product clocked in at 3.5%, rather than the 3.3% forecast, this encouraged investors to pile back into the US Dollar. With growth still running at an elevated level the chances of a December interest rate hike from the Federal Reserve remain high.
If September’s personal consumption expenditure core figure holds steady on the year this is likely to keep USD exchange rates on a stronger footing.
Softening Oil Prices Drive Canadian Dollar Down
As oil prices remained under pressure on Friday this limited the appeal of the Canadian Dollar. With Brent crude trending below US$77 per barrel, driven by the prospect of rising global oil supply, there was little demand for the commodity-correlated CAD. The relative strength of the US Dollar and high odds of an imminent Fed interest rate hike also put pressure on Canadian Dollar exchange rates.
Unless oil prices stage a recovery the Canadian Dollar is unlikely to find a rallying point over the course of the day.
Trade Worries Continue to Weigh Down New Zealand Dollar
As the impact of September’s trade data faded the New Zealand Dollar found itself lacking in any particular support. Worries remain over the outlook of the New Zealand economy as global trade continues to come under pressure from increased US protectionism. With the policy divergence between the Reserve Bank of New Zealand (RBNZ) and the Fed still set to widen further the ‘Kiwi’ has limited potential.
Any further deterioration in market risk appetite could put additional pressure on NZD exchange rates in the near term.
Data Released
October 29th 20:30 GBP Net Consumer Credit (SEP) 1.5 billion
October 29th 20:30 GBP Mortgage Approvals (SEP) 65,000
October 29th 23:30 USD Personal Consumption Expenditure Core (YoY) (SEP) 2%