Leap in German Factory Orders Offers Euro Boost

Market Trade Hopes Fuel Australian Dollar Gains

The Australian Dollar held onto a positive footing yesterday in spite of a lack of fresh domestic data. Investors remained encouraged by the less dovish nature of Tuesday’s Reserve Bank of Australia (RBA) policy announcement, with interest rates looking set to remain on hold in the near future. Lingering market confidence in the prospect of an imminent US-China trade agreement breakthrough also helped to shore up AUD exchange rates.

However, the mood towards the Australian Dollar could sour this morning if September’s trade balance shows a narrowed surplus as forecast.

Pound Softens Ahead of BoE Meeting

After the disappointing nature of October’s set of UK PMIs support for the Pound proved rather muted. With the UK appearing on track for another weak quarter of growth GBP exchange rates struggled to find any particular traction. The lingering uncertainty surrounding Brexit and the political landscape also helped to keep the Pound biased to the downside.

Even so, if Bank of England (BoE) policymakers adopt a more optimistic outlook at their November policy meeting this could offer GBP exchange rates a leg up.

Surge in German Factory Orders Benefits Euro

German factory orders saw an unexpectedly strong surge in September, leaping 1.3% on the month and reversing August’s modest decline. This positive showing helped to put a floor under EUR exchange rates, encouraging hopes that the Eurozone’s powerhouse economy might not be in as weak a position as market feared. A solid increase in Eurozone retail sales on the year also gave the single currency a boost overnight.

However, as forecasts point towards a fresh monthly decline in German industrial product the Euro could soon return to a downtrend.

Productivity Disappointment Weighs Down US Dollar

US non-farm productivity took a surprise hit in the third quarter, dipping -0.3% as the impact of the Trump administration’s 2017 corporate tax cut faded. With productivity showing its largest quarterly decline in nearly four years confidence in the wider economic outlook also weakened. This left USD exchange rates on a generally softer footing as investors raised the odds of the world’s largest economy losing further momentum before the end of the year.

Even if the latest jobless claims figures show an improvement on the week this may not be enough to shore up the US Dollar tonight.

Canadian Dollar Stumbles as Economic Activity Fails to Strengthen

As the Ivey purchasing managers index missed forecast in October this prompted fresh selling pressure for the Canadian Dollar. Instead of showing a sharp increase as expected the index instead dipped from 48.7 to 48.2, indicating a decline in economic activity on the month. Given existing market concerns over the strength of the Canadian economy this disappointing showing weighed heavily on CAD exchange rates.

Ahead of tomorrow’s Canadian labour market data the mood towards the Canadian Dollar is unlikely to see any dramatic improvement.

Higher Unemployment Rate Limits New Zealand Dollar Appeal

Although markets had anticipated an uptick in the third quarter New Zealand unemployment rate this failed to limit the vulnerability of NZD exchange rates. As unemployment picked up from 3.9% to 4.2% on the quarter this gave investors fresh reason to doubt the strength of the economic outlook. With wage growth also showing signs of deterioration support for the New Zealand Dollar proved limited yesterday.

Without any fresh New Zealand data support for NZD exchange rates is unlikely to improve without a positive shift in market risk appetite.

Data Releases

November 7th 10:30 AUD Trade Balance (SEP) 5.1 billion
November 7th 17:00 EUR German Industrial Production (MoM) (SEP) -0.3%
November 7th 22:00 GBP Bank of England Rate Decision 0.75%
November 7th 23:30 USD Initial Jobless Claims (NOV 2) 215,000

Louisa Heath