Australian Dollar Jumps as RBA Rules out Negative Interest Rates

Australian Dollar Strengthens as RBA Governor Rules out Negative Rates

As Reserve Bank of Australia (RBA) Governor Philip Lowe all but ruled out the possibility of cutting interest rates to below zero this gave the Australian Dollar a solid boost. Investors took Lowe’s comments as a hawkish signal, pushing AUD exchange rates higher across the board as the risk of future monetary loosening appeared to diminish. Although Lowe also indicated that rates are not likely to rise in the near future this was not enough to dent the Australian Dollar.

An uptick in the third quarter consumer price index could offer further encouragement to AUD exchange rates this morning.

Pound Rallies as Labour Offers Support to Early Election

News that Labour would support Boris Johnson’s motion for an early general election helped to lift GBP exchange rates overnight. However, the passage of the bill still faced challenges thanks to backbench amendments. With a sense of political uncertainty continuing to hang over the UK outlook GBP exchange rates struggled to find significant upside momentum, particularly in the wake of a weaker consumer credit report.

Another negative month for the BRC shop price index may also put a dampener on demand for the Pound today.

Rising Spanish Retail Sales Limit Euro Downside

A better-than-expected Spanish retail sales figure offered the Euro support yesterday, suggesting an improved sense of consumer confidence. Coupled with a steady showing from October’s French consumer confidence index this painted a more optimistic picture of the Eurozone’s outlook. However, as the risk of a sustained slowdown in the German economy remains the single currency’s gains were still limited.

Any softening of the German consumer price index may drag EUR exchange rates lower across the board as the risk of further European Central Bank (ECB) monetary loosening persists.

Dip in Consumer Confidence Limits US Dollar Appeal

Support for the US Dollar faltered after a surprise weakening of October’s consumer confidence index, which dipped from 126.3 to 125.9. This defied forecasts of a solid uptick in sentiment, underlining an increasing sense of anxiety within the world’s largest economy. With the Federal Reserve coming under further political pressure to cut interest rates dramatically investors saw little incentive to favour USD exchange rates.

Any slowdown in the third quarter gross domestic product could put additional pressure on the US Dollar ahead of tonight’s Federal Reserve policy announcement.

Prospect of 2020 Oil Oversupply Drags on Canadian Dollar

Oil prices faced a fresh decline last night after the International Energy Agency indicated that excess supplies are likely in 2020. With production expected to pick up further even as weak demand persists the mood of the oil market naturally soured. This left the Canadian Dollar on a generally weaker footing, in spite of optimism ahead of the Bank of Canada’s (BOC) latest policy meeting.

If BOC policymakers leave interest rates on hold as widely expected, however, this is likely to give CAD exchange rates a solid leg up.

New Zealand Dollar Lacks Direction amid Data Drought

The New Zealand Dollar struggled to find any particular direction yesterday thanks to the continued absence of any fresh domestic data. However, with the US Dollar falling out of favour the risk-sensitive NZD still held onto a positive footing against many of the majors.

NZD exchange rates remain vulnerable to any particular shift in market risk sentiment over the course of the day.

Data Releases

October 30th 10:01 GBP BRC Shop Price Index (YoY) (OCT)
October 30th 10:30 AUD Consumer Price Index (YoY) (3Q) 1.7%
October 30th 22:30 USD Gross Domestic Product Annualised (QoQ) (3Q) 1.6%
October 30th 23:00 EUR German Consumer Price Index (YoY) (OCT) 1.1%
October 31st 00:00 CAD Bank of Canada Rate Decision 1.75%

Louisa Heath