Australian Dollar Losses Limited by Business Confidence Improvement
A surprise improvement in October’s NAB business confidence index helped to limit the downside potential of AUD exchange rates yesterday. As the index picked up from 0 to 2 this encouraged a greater measure of confidence in the outlook of the Australian economy. Even so, the Australian Dollar struggled to gain ground against many of the majors as market risk appetite remained limited.
However, if the latest Westpac consumer confidence index also shows an uptick on the month this may offer AUD exchange rates a stronger rallying point this morning.
Tightening Labour Market Fails to Lift Pound Demand
Although the UK unemployment rate unexpectedly tightened from 3.9% to 3.8% in September this did little to improve the appeal of the Pound. Investors do not expect the labour market to tighten any further in the coming months, given the lingering uncertainty of Brexit which has already constrained economic activity. As growth in average weekly earnings saw a surprise easing the odds of a future Bank of England (BoE) interest rate cut increased, to the detriment of GBP exchange rates.
With forecasts pointing towards a weaker UK consumer price index reading the mood towards the Pound looks set to sour further.
Unexpectedly Improved Economic Sentiment Boosts Euro
November’s ZEW economic sentiment indexes bettered expectations, giving the Euro a solid boost against its rivals. The Eurozone sentiment index offered particular encouragement to investors, defying forecasts of a further decline to instead strengthen from -23.5 to just -1. Although this still leaves sentiment in negative territory the extent of the improvement gave the single currency room to strengthen.
Another underwhelming month of Eurozone industrial production may see EUR exchange rates stumble, though, as worries over the resilience of the manufacturing sector linger.
US Dollar Strengthens on Small Business Optimism Uptick
While the NFIB small business optimism index missed forecast, clocking in at 102.4 rather than 103.5, this was not enough to prevent the US Dollar pushing higher overnight. With sentiment still showing signs of improvement on the month the prospect of a weaker fourth quarter growth performance diminished. Coupled with a general decline in market risk appetite this helped to keep USD exchange rates on a positive footing.
Even though the consumer price index is not the Federal Reserve’s preferred measure of inflationary pressure any signs of weakness in October’s reading could still dent the US Dollar.
Positive Oil Market Trend Buoys Canadian Dollar
Bets that the Trump administration would opt to delay the imposition of tariffs on EU car exports gave the oil market a boost overnight. Hopes that global trade tensions could ease saw Brent crude hold onto a positive trend, even as the mood towards the US Dollar improved. As a result, the Canadian Dollar was able to make modest gains against its rivals during Tuesday’s European session.
In the absence of any fresh Canadian data, though, CAD exchange rates could struggle to maintain any particular momentum in the near term.
Weaker RBNZ Inflation Expectations Dent New Zealand Dollar
The Reserve Bank of New Zealand’s (RBNZ) fourth quarter inflation expectations report proved downbeat in nature, leaving NZD exchange rates on a bearish bias. With expectations pointing towards a weaker level of inflation the case for looser monetary policy remains. Growing anticipation ahead of the RBNZ policy announcement added to the weakness of the New Zealand Dollar, meanwhile.
Although a 25bpt interest rate cut is already effectively priced into NZD exchange rates further selling pressure could still be in store in the wake of the RBNZ’s announcement.
Data Releases
November 13th 09:30 AUD Westpac Consumer Confidence (NOV) 93.5
November 13th 11:00 NZD Reserve Bank of New Zealand Rate Decision 0.75%
November 13th 19:30 GBP Consumer Price Index (YoY) (OCT) 1.6%
November 13th 20:00 EUR Eurozone Industrial Production (YoY) (SEP) -2.3%
November 13th 23:30 USD Consumer Price Index (YoY) (OCT) 1.7%