Australian Dollar Falters Thanks to Falling Consumer Confidence
The Westpac consumer confidence index failed to offer markets cause for optimism, showing a -1.9% decline on the month in December. With domestic sentiment proving muted the Australian Dollar was left vulnerable to renewed selling pressure as the risk of a weaker fourth quarter economic performance appears to grow. However, a general increase in market risk appetite thanks to the stronger US inflation data helped AUD exchange rates to return to an uptrend last night.
A weaker consumer inflation expectations report could see the Australian Dollar fall out of favour once again, though, as investors continue to weigh up the odds of a 2020 Reserve Bank of Australia (RBA) interest rate cut.
Election Jitters Fail to Dent Pound Upside
GBP exchange rates maintained their positive footing yesterday as investors continued to bet on the prospect of a Conservative majority. While the opinion polls showed signs of narrowing on the final day of campaigning ahead of the general election this failed to put any particular dampener on the Pound.
While the outcome of the election is unlikely to become clear until Friday’s European session the Pound could still experience weakness once the polls open.
Euro Under Pressure Ahead of ECB Meeting
Without the support of fresh Eurozone data EUR exchange rates struggled to find much in the way of traction on Wednesday. As markets continued to brace for the upcoming European Central Bank (ECB) interest rate announcement the single currency fell out of favour once again. While no change in monetary policy looks likely at this stage the Euro still looks vulnerable to any dovish commentary.
As long as the ECB appears on course to maintain a cautious outlook for the foreseeable future the mood towards the single currency is unlikely to improve.
Rising US Inflation Dampens US Dollar Appeal
A stronger-than-expected uptick in the headline consumer price index saw the US Dollar come under increased pressure overnight. With anticipation building ahead of the Federal Open Market Committee (FOMC) policy announcement investors were spooked by the 2.1% inflation rate. Although the CPI is not the Fed’s preferred gauge of inflationary pressure this increase still appears to add to the case for lower interest rates, raising the odds of a 2020 rate cut coming sooner rather than later.
If November’s producer price index also shows an increase on the year this could drag the US Dollar lower across the board.
Sliding Capacity Utilisation Drags on Canadian Dollar
While market risk appetite improved during last night’s European session this failed to offer any particular support to the Canadian Dollar. Investors were more concerned by the disappointing nature of the third quarter capacity utilisation index, which fell short of forecasts to dip from 83.3% to 81.7%. This decline suggests that Canadian industries are reining in their production, potentially pointing towards a fresh deterioration in economic activity.
However, with the new housing price index expected to show a modest uptick this evening CAD exchange rates may find some cause for confidence.
Weaker Retail Card Spending Fuels New Zealand Dollar Losses
New Zealand retail card spending unexpectedly contracted in November, suggesting that consumers are taking a more cautious outlook in the final months of the year. With markets already anxious over the strength of the New Zealand economy this left NZD exchange rates on a generally softer footing. However, the New Zealand Dollar was still able to capitalise on the weakness of some of its rivals as risk appetite picked up overnight.
Another solid month for the food price index could encourage NZD exchange rates to find greater support this morning.
Data Releases
December 12th 07:45 NZD Food Price Index (YoY) (NOV) 2.1%
December 12th 10:00 AUD Consumer Inflation Expectation (DEC) 3.5%
December 12th 22:45 EUR European Central Bank Rate Decision 0.0%
December 12th 23:30 CAD New Housing Price Index (MoM) (OCT) 0.1%
December 12th 23:30 USD Producer Price Index (YoY) (NOV) 1.1%