Fresh Global Trade Doubts Dent Australian Dollar
As the Trump administration denied reports that it had agreed to roll back some of its tariffs on Chinese produce in order to secure a phase one trade deal market risk appetite diminished. This left the Australian Dollar on a weak footing at the start of the week, with investors instead piling into safe-haven assets. With the prospect of an imminent trade agreement fading AUD exchange rates struggled to find any particular degree of support as the global economy looks set to slow further.
The mood towards the Australian Dollar could sour further this morning if October’s NAB business confidence index continues to stagnate.
Stronger UK Growth Shores up Pound
The Pound bounced back on Monday as the third quarter UK gross domestic product clocked in at 0.3% on the quarter. As the UK economy avoided entering a technical recession this gave GBP exchange rates a solid boost across the board. Even though the underlying details of the growth report still point towards a sustained slowdown this was not enough to hamper the Pound’s gains overnight.
GBP exchange rates could maintain a solid footing as long as UK average weekly earnings show solid growth in October, giving Bank of England (BoE) policymakers less reason to cut interest rates.
Inconclusive Spanish Election Limits Euro Appeal
A fresh deadlock following the Spanish parliamentary election did little to improve the appeal of the Euro yesterday. This lingering sense of political uncertainty put an additional dampener on the single currency as the latest bout of Eurozone data proved underwhelming. Further signs of weakness from the Italian industrial sector limited the potential for EUR exchange rate strength, with manufacturing across the Eurozone looking set to remain weak for the remainder of the year.
Any improvement in the ZEW German economic sentiment index may encourage the Euro to recover some ground today, even though the index is expected to remain within negative territory.
US Dollar Fails to Benefit from US-China Trade Doubts
In spite of the White House’s attempt to pour cold water over the prospect of an imminent US-China trade agreement the US Dollar struggled to find support last night. Even with market risk appetite generally diminishing USD exchange rates remained under pressure. Lingering worries over the possibility of the Federal Reserve pursuing further monetary loosening in 2020 helped to keep the US Dollar on a weaker footing.
However, as forecasts point towards a solid uptick from October’s NFIB small business optimism index demand for the US Dollar could pick up tonight.
Labour Market Weakness Keeps Canadian Dollar on Back Foot
Support for the Canadian Dollar remained generally muted at the start of the week even as oil prices made modest gains. Following on from Friday’s underwhelming jobs report confidence in the outlook of the Canadian economy has proved largely limited, to the detriment of CAD exchange rates.
Even so, if oil markets maintain a bullish outlook this could still help the Canadian Dollar to pick up some ground this afternoon in the absence of any fresh Canadian data.
New Zealand Dollar Shakes off Disappointing Card Spending
A monthly decline in retail card spending cast fresh doubt over the strength of the New Zealand economic outlook. With spending down -0.6% on the month consumers appear to be taking a less optimistic view in the face of a sustained slowdown. However, NZD exchange rates found fresh support overnight as support for the safe-haven US Dollar deteriorated.
The New Zealand Dollar could easily fall back out of favour today, however, if the fourth quarter business inflation expectations report points towards weaker price pressures to come.
Data Releases
November 12th 10:30 AUD NAB Business Confidence (OCT) 0
November 12th 12:00 NZD Reserve Bank of New Zealand 2-Year Inflation Expectation (4Q) 1.8%
November 12th 19:30 GBP Average Weekly Earnings (3M/YoY) (SEP) 3.8%
November 12th 20:00 EUR German ZEW Economic Sentiment Index (NOV) -13
November 12th 21:00 USD NFIB Small Business Optimism (OCT) 103.5