Sustained Business Investment Decline Drags on Australian Dollar

Australian Dollar Softens as Private Capital Expenditure Decline Continues

Another quarter of contraction in private capital expenditure saw the Australian Dollar come under renewed pressure. With business investment continuing to decline in the third quarter markets see an increased risk to Australia’s economic and inflationary outlook. As US legislation aimed at protecting pro-democracy protesters in Hong Kong was signed into law this appeared to reduce the likelihood of an imminent US-China trade agreement, diminishing market risk appetite.

Any weakening in October’s private sector credit figures could put an additional drag on AUD exchange rates this morning.

Stronger Housing Prices Fail to Sustain Pound Gains

An unexpectedly solid acceleration in UK housing price growth offered the Pound a fresh leg up against its rivals. With the housing market appearing to largely shrug off the latest bout of political anxiety hopes of a more resilient economic performance improved. Although a fresh YouGov poll suggested that the Conservatives remain in the lead, however, GBP exchange rates struggled to hold onto their initial boost for long.

A steady showing from the GfK consumer confidence index is unlikely to offer the Pound any particular boost ahead of the weekend.

Euro Trends Higher in spite of German Inflation Miss

In spite of a disappointing set of German consumer price index data the Euro remained on a positive footing overnight. Although the headline inflation rate failed to pick up on the year as forecast, instead holding steady at 1.1%, EUR exchange rates still made modest gains across the board. As the EU harmonised inflation rate fared better this helped to limit the potential for single currency selling, especially in the face of renewed market risk aversion.

However, a similarly underwhelming Eurozone consumer price index report could still see the Euro fall out of favour tonight.

Thanksgiving Break Limits US Dollar Support

As the Thanksgiving holiday saw a dearth of fresh US data releases USD exchange rates struggled to find any significant momentum. Even so, the latest escalation in political tensions between the US and China still helped to boost the US Dollar as the prospect of an imminent phase one trade agreement faded. While a deterioration in relations between the two countries could weigh on the US economy in the months ahead this prospect failed to dent USD exchange rates.

The muted appeal of the US Dollar is likely to persist heading into the weekend, though, as the calendar remains lacking in domestic data.

Widened Current Account Deficit Weighs on Canadian Dollar

The sharp widening of the third quarter current account deficit left the Canadian Dollar under pressure as confidence in the economic outlook faltered. Although forecasts had pointed towards a deterioration in the current account balance investors were still discouraged by the figures. Coupled with an increased sense of market risk aversion this drove CAD exchange rates to shed fresh ground.

Further weakness could be in store for the Canadian Dollar during tonight’s European session if the latest set of gross domestic product data fails to impress.

Signs of Business Confidence Improvement Bolster New Zealand Dollar

As November’s ANZ business confidence index saw a solid improvement on the month, strengthening from -42.4 to -26.4, this helped to limit the downside potential of NZD exchange rates. While sentiment remains decidedly weak investors took encouragement from signs that the decline has bottomed out, betting that further improvement is likely in the months ahead.

However, with forecasts pointing towards a sharp decline in monthly building permits the New Zealand Dollar looks vulnerable to selling pressure this morning.

Data Releases

November 29th 07:45 NZD Building Permits (MoM) (OCT) -2.5%
November 29th 10:01 GBP GfK Consumer Confidence (NOV) -14
November 29th 10:30 AUD Private Sector Credit (YoY) (OCT) 2.7%
November 29th 20:00 EUR Eurozone Consumer Price Index (YoY) (NOV) 0.9%
November 29th 23:30 CAD Gross Domestic Product (YoY) (SEP) 1.4%

Louisa Heath