Hopes of ‘Partial’ US-China Trade Deal Boost Australian Dollar
Reports that Chinese officials are willing to offer a ‘partial trade deal’ with the US helped to shore up the Australian Dollar. Even as tensions between the US and China showed fresh signs of ramping up the suggestion of a limited agreement was still enough to boost market sentiment. However, the strength of AUD exchange rates remained muted thanks to the lingering risk of this latest round of trade talks breaking down without making any tangible progress.
Evidence of a slowdown in Australian home loans could dent AUD exchange rates this morning as investors remain on the lookout for signs of domestic economic weakness.
Stalling of Brexit Talks Weighs Heavily on Pound
Confidence in the Pound remained limited overnight as UK and EU officials confirmed that Brexit talks had come to a halt. With the risk of a no-deal Brexit looking increasingly high GBP exchange rates were left to trend lower across the board, fuelled by the persistent sense of political anxiety. Although the Bank of England (BoE) indicated that the UK banking system is likely to cope with even a disruptive Brexit scenario this was not enough to offer investors any significant encouragement.
With forecasts pointing towards the monthly gross domestic product stagnating in August the mood towards the Pound may sour further over the course of the day.
Euro Pushes Higher Ahead of German Trade Data
An absence of fresh Eurozone data failed to limit the appeal of the Euro yesterday, even though worries over the strength of the economic outlook remain. With investors hopeful of a potential breakthrough in US-China trade relations anxiety over the recent decline in global trade growth eased. Even so, the stalling of Brexit talks still cast a shadow over EUR exchange rates as the potential for a further loss of economic momentum remains.
A narrowing of the German trade surplus could see the single currency fall out of favour once again, though.
Odds of October Fed Rate Cut Dent US Dollar
As markets braced for the release of the Federal Open Market Committee’s (FOMC) September meeting minutes support for the US Dollar diminished. While investors had already priced in high odds of the Fed cutting interest rates at the end of October USD exchange rates still struggled to find much in the way of traction last night. Hopes of potential progress towards a US-China trade agreement also put pressure on the US Dollar, with market risk appetite temporarily recovering.
Even so, the latest consumer price index data could offer USD exchange rates a rallying point if it offers evidence of strengthening inflationary pressure.
Higher US Oil Inventories Limit Canadian Dollar Appeal
Although market risk appetite showed signs of picking up overnight this was not enough to boost the Canadian Dollar. As US crude oil inventories saw a larger increase than forecast worries over the prospect of a fresh global oversupply glut weighed on CAD exchange rates. While mounting geopolitical tensions in the Middle East helped to shore up oil prices in the short term confidence in the oil market’s longer term outlook remains muted.
Another month of decline for the new housing price index could put additional pressure on the Canadian Dollar tonight.
Signs of Economic Resilience Bolster New Zealand Dollar
NZD exchange rates benefitted from a solid rebound in September’s ANZ truckometer index, which strengthened 2.4% on the month. This uptick in economic activity suggests a greater degree of resilience within the New Zealand economy, limiting the potential for New Zealand Dollar losses. With investors showing a greater appetite for risk the antipodean currency was able to make modest gains against many of the majors.
If this morning’s food price index fails to impress, however, anxiety over the potential for further Reserve Bank of New Zealand (RBNZ) interest rate cuts could weigh heavily on NZD exchange rates.
Data Releases
October 10th 07:45 NZD Food Price Index (YoY) (SEP) 1.8%
October 10th 10:30 AUD Home Loans (MoM) (Aug) 2.3%
October 10th 16:00 EUR German Trade Balance (AUG) 18.6 billion
October 10th 18:30 GBP Gross Domestic Product (MoM) (AUG) 0.0%
October 10th 22:30 CAD New Housing Price Index (YoY) (AUG) -0.4%
October 10th 22:30 USD Consumer Price Index (YoY) (SEP) 1.8%