Disappointing Credit Growth Limits Australian Dollar Demand
As private sector credit growth fell short of forecast on the month in October support for the Australian Dollar weakened on Friday. The growth of just 0.1% on the month cast a fresh shadow over the economic outlook, suggesting a greater degree of caution among both businesses and households. In the absence of any breakthrough on US-China trade investors saw little incentive to keep AUD exchange rates from trending lower across the board.
Another solid month of expansion for the manufacturing PMI may help to limit the downside potential of the Australian Dollar this morning, however.
Pound Slides as UK Consumer Confidence Remains at Six-Year Low
The GfK consumer confidence index held steady at -14 in November, remaining at its joint-lowest level since 2013. This limited the appeal of the Pound ahead of the weekend, with investors discouraged by the prolonged period of negative consumer sentiment. As stronger levels of consumer spending have helped to shore up economic growth in previous quarters this weak reading kept the risk of a fourth quarter slowdown alive.
Confirmation that the manufacturing sector lost further momentum in November could keep the Pound under pressure tonight.
Higher Eurozone Inflation Fails to Shore up Euro
November’s Eurozone consumer price index report delivered a surprise as the headline inflation rate picked up from 0.7% to 1.0% on the year, bettering forecasts. Even so, this improvement was not enough to shore up the single currency on Friday as inflation still remains some way short of the European Central Bank’s (ECB) 2% target. A sharp contraction in Germany’s latest retail sales data also limited the potential for EUR exchange rate gains.
If the finalised raft of Eurozone manufacturing PMIs confirm that the sector continued to lose momentum in the last month the Euro looks set to remain on the back foot.
US Dollar Continues to Lack Direction
In the absence of any fresh US data USD exchange rates struggled to find any particular headway on Friday. While doubts over the potential for the US and China to imminently agree a phase one trade agreement remain this was not enough to give the US Dollar any particular boost. With market risk aversion muted the US Dollar saw little movement against the majors.
Ahead of tonight’s ISM manufacturing index support for USD exchange rates could fade further, given that forecasts point towards a sector contraction.
Signs of Growth Slowdown Weigh on Canadian Dollar
Demand for the Canadian Dollar continued to weaken in the wake of the latest raft of gross domestic product data. As the quarterly growth rate eased from 0.9% to 0.3% this raised fresh concerns over the resilience of the Canadian economy in the face of weakening global trade. With monthly growth holding steady at a lacklustre 0.1% investors saw little cause for confidence in the Canadian Dollar.
CAD exchange rates could find a rallying point tonight, however, if November’s manufacturing PMI strengthens as anticipated.
Construction Slowdown Limits New Zealand Dollar Support
A sharp monthly decline in building permits limited the appeal of the New Zealand Dollar as confidence in the economic outlook deteriorated. Weakness in the domestic construction sector suggests that the economy remains on track for a further loss of momentum in the fourth quarter. Coupled with lacklustre market sentiment this left NZD exchange rates on a weaker footing.
However, an improvement in the third quarter terms of trade index may encourage the New Zealand Dollar to recover some of its footing.
December 2nd 07:30 AUD Manufacturing PMI (NOV) 51.4
December 2nd 07:45 NZD Terms of Trade Index (QoQ) (3Q) 1.0%
December 2nd 18:55 EUR German Manufacturing PMI (NOV F) 43.8
December 2nd 19:30 GBP Manufacturing PMI (NOV F) 48.1
December 3rd 00:30 CAD Manufacturing PMI (NOV) 52.6
December 3rd 01:00 USD ISM Manufacturing (NOV) 49.5