Australian Dollar Fails to Shake Off Easing PMIs
As both December’s manufacturing and services PMIs showed an easing in growth on the month the mood towards the Australian Dollar deteriorated. This latest sign of weakness within the Australian economy left investors with little incentive to support AUD exchange rates. The commodity-correlated Australian Dollar also came under pressure ahead of the weekend thanks to fresh signs of a slowdown within the Chinese economy, something which could also weigh on Australian growth.
Ahead of the release of the Reserve Bank of Australia’s (RBA) meeting minutes tomorrow the appeal of the Australian Dollar may remain limited.
Lack of Brexit Progress Limits Pound Demand
As the latest EU summit ended with an affirmation that the Withdrawal Agreement will not be renegotiated this left the Pound trending lower against its rivals. With the Agreement in its current form unlikely to find sufficient support among MPs the lack of any fresh concessions reignited market anxieties over Brexit. Although Theresa May no longer faces the threat of being ousted by her own MPs the political situation in the UK continues to cast a shadow over GBP exchange rates.
If the December CBI industrial trends orders index shows a fresh contraction this could weigh heavily on the Pound tonight.
Euro Softens as Eurozone PMI Eases to Four Year Low
December’s raft of Eurozone manufacturing and services PMIs failed to offer the Euro any measure of encouragement on Friday. As growth across the currency union slowed to a four year low this weighed heavily on demand for the single currency. Investors were also concerned by a sharp, surprise slowdown in the French economy as both the manufacturing and service sector fell into a state of contraction on the month.
A narrowing of the Eurozone trade surplus may add to the bearishness of EUR exchange rates this evening as confidence in the domestic outlook continues to deteriorate.
Better-Than-Forecast Retail Sales Boost US Dollar
Confidence in the US Dollar picked up ahead of the weekend as November’s advance retail sales data bettered forecast. Although sales growth was still modest, clocking in at 0.2%, this was still enough to shore up USD exchange rates. While November’s manufacturing production figure highlighted the underlying vulnerability of the US economy, stagnating on the month, this failed to dent the gains of the US Dollar.
If tonight’s Empire manufacturing index also points towards weakness within the sector USD exchange rates could return to a softer footing.
Market Worries Weigh Down Canadian Dollar
As the weaker Chinese data dented confidence in the global growth outlook this left the Canadian Dollar vulnerable to selling pressure. Although Brent crude held above the psychologically important US$60 per barrel mark this was not enough to keep CAD exchange rates from sliding. With markets jittery over the oil outlook heading into 2019 the appeal of the Canadian Dollar was naturally muted.
Without a significant recovery in oil prices CAD exchange rates could struggle to find a rallying point in the near term.
New Zealand Dollar Weakens in Spite of Solid Manufacturing Growth
While November’s New Zealand manufacturing PMI did not ease as forecast this failed to keep NZD exchange rates on an uptrend. Even with the domestic economy showing signs of resilience appetite for the New Zealand Dollar weakened in response to a deterioration in market risk sentiment. With the US Dollar on a stronger footing and global growth looking fragile NZD exchange rates were left to trend lower.
A similarly positive services PMI, however, may encourage the New Zealand Dollar to recover some of its lost ground this morning.
December 17th 08:30 NZD Services PMI (NOV) 54.9
December 17th 21:00 EUR Eurozone Trade Balance (OCT) 12.7 billion
December 17th 22:00 GBP CBI Industrial Trends Orders (DEC) -7
December 18th 00:30 USD Empire Manufacturing (DEC) 21.5