Australian Dollar Capitalises on US-China Trade Hopes
As US and Chinese officials continued to signal a sense of optimism over ongoing trade talks hopes of greater progress helped to shore up the Australian Dollar. With the two sides appearing on track to reach an agreement the general sense of market risk appetite naturally picked up. This gave AUD exchange rates a fresh boost, given the antipodean currency’s status as a common trading proxy for the Chinese economy.
Fresh commentary from Reserve Bank of Australia (RBA) assistant governor Christopher Kent could see the Australian Dollar fall out of favour, however, if he signals any particular degree of dovishness.
Rising Odds of Brexit Delay Weigh Down Pound
Vocal opposition to Boris Johnson’s proposed three-day timetable to push through his Brexit deal saw the Pound losing ground overnight. With the agreement looking increasingly unlikely to pass this week the odds of a fresh extension of the Brexit deadline picked up. However, after another disappointing month for the CBI business optimism index the prospect of Brexit-based uncertainty being prolonged any further weighed heavily on GBP exchange rates.
The latest developments in parliament look set to drive further volatility for the Pound in the days ahead.
Widening Spanish Trade Deficit Limits Euro Appeal
A widened Spanish trade deficit left investors with little incentive to favour the single currency last night. With signs continuing to point towards weakness within the currency union EUR exchange rates struggled to find any particular degree of support. An increased sense of market risk sentiment also limited the appeal of the Euro as demand generally favoured higher-yielding assets over the softening single currency.
Another decline in the Eurozone consumer confidence index may add to the bearish mood of EUR exchange rates.
Positive Manufacturing Index Fails to Boost US Dollar
While the Richmond Fed manufacturing index saw an unexpected return to positive territory in October this failed to give the US Dollar any particular boost. Even as the index bounced back from -9 to 8 USD exchange rates came under pressure from increasing hopes of US-China trade progress. An unexpectedly poor month of existing home sales also put a dampener on the US Dollar, with sales found to have plunged -2.2% on the month in September.
A similarly weak performance from August’s house price index could see USD exchange rates shedding additional ground tonight.
Retail Sales Contraction Drags on Canadian Dollar
August’s retail sales data fell short of forecasts, delivering a surprise -0.1% contraction on the month. This disappointing showing suggests a weaker level of consumer confidence within the Canadian economy, raising the risk of a growth slowdown. Although Justin Trudeau scraped to victory in the federal election, losing his majority in the process, this offered little support to CAD exchange rates in the short term.
With forecasts pointing towards an easing in wholesale trade sales growth the Canadian Dollar may struggle to find a rallying point in the near future.
New Zealand Dollar Benefits from Easing Trade Tensions
Easing global trade tensions offered a further boost to the New Zealand Dollar as markets bet on the chances of an imminent breakthrough in US-China trade talks. With both sides demonstrating optimism this encouraged investors to adopt a more confident outlook, to the benefit of the risk-sensitive antipodean currency.
If September’s trade deficit narrows as anticipated this could give NZD exchange rates an additional boost this morning.
Data Releases
October 23rd 07:45 NZD Trade Balance (SEP) -1.2 billion
October 23rd 22:30 CAD Wholesale Trade Sales (MoM) (AUG) 0.3%
October 23rd 23:00 USD House Price Index (MoM) (AUG) 0.4%
October 24th 00:00 EUR Eurozone Consumer Confidence Index (OCT) -6.7