Underwhelming Chinese Trade Data Drags on Australian Dollar

Falling Chinese Imports Put Pressure on Australian Dollar

Another month of sharp decline in Chinese imports left the Australian Dollar on a weaker footing, even as tensions between the US and China showed signs of thawing. Although the two sides agreed a ‘partial’ trade deal ahead of the weekend this was not enough to encourage markets to maintain a risk-positive outlook. As anticipation mounted for the release of the Reserve Bank of Australia’s (RBA) October meeting minutes AUD exchange rates slipped lower.

If the RBA minutes point towards greater dovishness among policymakers, raising the odds of another 2019 interest rate cut, demand for the Australian Dollar is likely to remain weak.

Pound Bullishness Eases as Brexit Breakthrough Remains Elusive

As the weekend’s crunch Brexit talks failed to yield any visible breakthrough the Pound soon fell back out of favour with investors. The persistent issue of the Irish border continued to frustrate officials, stoking concerns that the matter still might not see a resolution before the current deadline. Even so, after the strong gains made on Friday GBP exchange rates were still able to hold onto relatively high levels for the time being.

However, with forecasts pointing towards a modest slowdown in August’s UK average earnings data support for the Pound could fade further over the course of the day.

Sharp Eurozone Industrial Production Fall Weighs on Euro

The Eurozone continued to demonstrate signs of weakness yesterday as August’s industrial production data showed a -2.8% decline on the year. This poor showing confirms the negative impact that increased global trade tensions have been having on the Eurozone economy, denting the appeal of the Euro. As the latest German wholesale prices index also showed a sharp decline, pointing towards lacklustre inflationary pressure, EUR exchange rates were left on a weaker footing.

Another negative performance from the ZEW economic sentiment survey could weigh heavily on the Euro, with markets expecting to see another monthly deterioration in confidence.

US Dollar Capitalises on Fading Risk Appetite

With market risk appetite starting to fade in the wake of the announced partial US-China trade deal USD exchange rates were able to gain renewed traction overnight. As investors remain wary of the health of the global growth outlook the safe-haven US Dollar found fresh demand, even as the Chinese trade surplus swelled unexpectedly.

As the Empire manufacturing index is forecast to drop from 2 to just 1 in October, however, support for the US Dollar may well fade tonight.

Faltering Trade Optimism Drags Canadian Dollar Lower

Fading optimism over the outcome of last week’s US-China trade talks saw oil prices fall sharply during Monday’s European session. Although global supply concerns were bolstered by the news that an Iranian oil tanker had been struck with missiles off the coast of Saudi Arabia this failed to shore up the risk-sensitive Canadian Dollar. As it remains to be seen whether US-China trade relations will see further improvement CAD exchange rates struggled to made headway.

Even so, a solid existing home sales figure may help the Canadian Dollar to return to an uptrend today.

Weaker Services PMI Limits New Zealand Dollar Appeal

September’s services PMI failed to impress even though it remained firmly within expansion territory. As the index dipped from 54.6 to 54.4 anxiety over the strength of the economic outlook persisted, limiting the appeal of the New Zealand Dollar. Dwindling market risk appetite also put a dampener on NZD exchange rates as investors turned to safe-haven assets instead.

Without the release of any fresh domestic data the New Zealand Dollar looks set to maintain a soft footing this morning, barring any dramatic shift in market sentiment.

Data Releases

October 15th 10:30 AUD Reserve Bank of Australia Meeting Minutes (OCT)
October 15th 18:30 GBP Weekly Earnings ex Bonus (3M/YoY) (AUG) 3.7%
October 15th 19:00 EUR ZEW German Economic Sentiment Index (OCT) -27.3
October 15th 22:30 USD Empire Manufacturing Index (OCT) 1
October 15th 23:00 CAD Existing Home Sales (MoM) (SEP) 2.0%

Louisa Heath