Disappointing Inflation Signals Weigh Down Euro

Australian Dollar Trends Lower on Negative Leading Index

As the Westpac leading index remained in negative territory in October this kept the Australian Dollar on the back foot. While the index clocked in at -0.1% rather than -0.3% this failed to offer investors any particular sense of reassurance. With the Australian economy looking set to shed further momentum in the fourth quarter AUD exchange rates were left to trend lower.

If hopes of US-China trade progress fade this could see the Australian Dollar losing further ground today.

Political Anxiety Drags on Pound After Election Debate

In the aftermath of the first debate of the general election campaign the mood towards the Pound proved generally muted. Investors remain wary of the potential for the December vote to deliver another hung parliament, limiting support for GBP exchange rates. Without the release of fresh UK economic data markets saw little reason to favour the Pound last night, with the issue of Brexit still casting a shadow over the domestic outlook.

A widening budget deficit could add to the bearish bias of GBP exchange rates, with higher levels of government debt likely to discourage investors.

Euro Falters amid Signs of ECB Cautiousness

The European Central Bank (ECB) took a cautious tone in its latest financial stability review, warning that risks to the global financial system are increasing. Demand for the Euro also weakened in response to October’s German producer price index figures. As the index contracted -0.6% on the year this suggests that inflationary pressure within the Eurozone’s powerhouse economy remains weak, offering ECB policymakers further cause for dovishness.

If the ECB’s meeting minutes show increasing signs of caution among policymakers the single currency is likely to fall further out of favour.

US Dollar Struggles to Capitalise on Market Risk Aversion

As markets braced for the release of the Federal Open Market Committee’s (FOMC) most recent set of meeting minutes the US Dollar struggled to find any particular traction against its rivals. The increasing likelihood of the Fed cutting interest rates further in 2020 helped to limit the appeal of the US Dollar. Ongoing speculation over the odds of an imminent breakthrough in US-China trade talks also put a dampener on USD exchange rates.

An uptick from the Philadelphia Fed manufacturing index could encourage the US Dollar to return to a stronger footing tonight, though.

Monthly Inflation Uptick Fails to Boost Canadian Dollar

While October’s consumer price index saw a solid rebound in the monthly inflation rate this was not enough to shore up the Canadian Dollar overnight. With the headline inflation rate still falling short of the Bank of Canada’s (BOC) target rate the possibility of future monetary loosening remains. Another weekly increase in US crude oil stockpiles also limited demand for the commodity-correlated CAD, with global oversupply concerns lingering.

However, as forecasts point towards a solid increase in the ADP employment change figure for October the Canadian Dollar could find a rallying point.

Global Trade Worries Keep New Zealand Dollar Soft

Demand for the New Zealand Dollar proved weak yesterday, with investors lacking any particular incentive to favour the higher-yielding asset. The continued lack of tangible progress towards a US-China trade agreement weighed on NZD exchange rates, with confidence in the global trade outlook still in decline.

Unless domestic credit card spending figures impress this morning the New Zealand Dollar may remain under pressure in the near term.

Data Releases

November 21st 12:00 NZD Credit Card Spending (YoY) (OCT)
November 21st 19:30 GBP Public Sector Net Borrowing (OCT) -8.6 billion
November 21st 22:30 EUR European Central Bank Meeting Minutes (OCT)
November 21st 23:30 CAD ADP Employment Change (OCT) 53,300
November 21st 23:30 USD Philadelphia Fed Business Outlook (NOV) 7

Louisa Heath