Australian Dollar Benefits from Steady RBA Policy Signal
It came as little surprise to markets that the Reserve Bank of Australia (RBA) opted to leave interest rates on hold at its November policy meeting. As policymakers indicated a willingness to remain on hold for longer, in spite of a downward revision to its 2019 growth forecast, AUD exchange rates found fresh support. Hopes of imminent progress towards a preliminary US-China trade agreement also offered a boost to the antipodean currency.
Even so, confidence in the economic outlook is likely to falter in anticipation of tomorrow’s construction PMI, leaving the Australian Dollar exposed to selling pressure.
Stagnant UK Service Sector Limits Pound Appeal
Although October’s UK services PMI bettered forecast, picking up from 49.5 to 50.0, this failed to offer GBP exchange rates any particular encouragement. With the service sector in stagnation the UK looks at risk of seeing a further loss of economic momentum in the fourth quarter. As a result, even though the index did not show any further deterioration, this left investors with limited incentive to favour the Pound.
As political uncertainty mounts in anticipation of the upcoming December general election the Pound may struggle to find any particular upside potential today.
Weak Eurozone Producer Price Index Weighs on Euro
As September’s Eurozone producer price index dipped to -1.2% on the year the mood towards the Euro soured. Although the monthly index proved a little more positive in nature this was not enough to outweigh the disappointing year-on-year deterioration. With signs continuing to point towards weak inflationary pressure within the currency union the European Central Bank (ECB) looks set to maintain its dovish policy bias for some time to come.
With investors anticipating another sharp decline in German factory orders the Euro is likely to remain on a softer footing this evening.
US Dollar Gains Ground as US Trade Improves
USD exchange rates found a boost overnight as the US trade deficit narrowed from -54.9 billion to -52.5 billion, suggesting that trade conditions are seeing an improvement. Investors also took encouragement from the positive nature of the latest ISM non-manufacturing PMI, which picked up from 52.6 to 54.7 in October. With the world’s largest economy showing greater signs of resilience the appeal of the US Dollar naturally improved.
Comments from Federal Reserve policymakers may encourage USD exchange rates to gain further ground tonight, provided that they signal a willingness to leave interest rates on hold.
Narrowed Trade Deficit Fails to Boost Canadian Dollar
While the Canadian trade deficit narrowed in September this was not enough to give the Canadian Dollar any significant boost. As the improvement was driven by a drop in import volumes, rather than an uptick in exports, the data offered limited support to CAD exchange rates. OPEC’s decision to cut its global oil demand forecast for 2020 also put pressure on the Canadian Dollar as oil prices faltered.
A strong rebound from October’s Ivey PMI could give CAD exchange rates a lift tonight, though, as investors expect to see a solid month of economic activity.
New Zealand Dollar Stalls in Anticipation of Higher Unemployment
A strong performance from the ANZ commodity price index gave the New Zealand Dollar a boost yesterday. As prices strengthened 1.2% on the month in October this suggested a higher degree of domestic inflationary pressure. Even so, NZD exchange rates struggled to hold onto any positive momentum overnight thanks to the strengthening US Dollar.
Demand for the New Zealand Dollar looks set to weaken further this morning as forecasts point towards a higher third quarter unemployment rate.
November 6th 07:45 NZD Unemployment Rate (3Q) 4.1%
November 6th 17:00 EUR German Factory Orders (YoY) (SEP) -6.3%
November 7th 01:00 CAD Ivey Purchasing Managers Index (OCT) 54.4