Australian Dollar Rallies Thanks to Fed Comments
In the wake of the Federal Reserve’s latest policy decision the Australian Dollar pushed higher, benefitting as markets interpreted the central bank’s outlook as leaning towards dovishness. A higher Australian consumer inflation expectation index also helped to shore up AUD exchange rates, meanwhile. With signs pointing towards a higher level of inflation in the coming year this diminished the odds of the Reserve Bank of Australia (RBA) imminently cutting interest rates.
However, the risk-sensitive Australian Dollar may struggle to hold onto its positive footing for long today as focus turns towards global trade developments.
Pound Slides as Markets Brace for Election Result
As the polls opened on election day the Pound came under renewed pressure across the board. Investors still see the potential for a political upset, given that pollsters had noted a large proportion of undecided voters ahead of the election. With a Conservative majority already effectively been priced into GBP exchange rates this left the Pound vulnerable to selling pressure as market jitters picked up.
Until the ultimate outcome of the election becomes clear GBP exchange rates are likely to remain volatile.
Euro Fails to Benefit from Lagarde’s ECB Debut
European Central Bank (ECB) President Christine Lagarde’s first official policy announcement did not cause much of a stir for EUR exchange rates. With monetary policy looking set to remain on its current course for some months yet to come the mood towards the Euro failed to see any particular improvement during Thursday’s European session. The underwhelming nature of October’s Eurozone industrial production data also put a dampener on the single currency.
However, an uptick in the latest German wholesale price index may encourage some fresh demand for the Euro this afternoon.
US Dollar Falters as Markets Bet on Dovish Fed Leanings
As November’s producer price index failed to pick up on the year as forecast this helped to limit the downside potential of USD exchange rates. However, in the wake of the Federal Open Market Committee’s (FOMC) final policy announcement of 2019 the appeal of the US Dollar remained generally muted. With the Fed looking more likely to cut interest rates than raise them in the coming year investors saw little incentive to favour the US Dollar over its higher-yielding rivals.
Even so, USD exchange rates could find some support heading into the weekend if November’s advance retail sales data shows signs of stronger consumer spending.
Hopes of US-China Trade Deal Fail to Boost Canadian Dollar
Reports that the US and China are close to a deal encouraged oil prices to push sharply higher overnight, limiting the downside potential of the Canadian Dollar. Even so, as doubts remain over the underlying health of the Canadian economy CAD exchange rates struggled to push higher against a number of the majors. Anticipation ahead of the latest comments from Bank of Canada (BOC) Governor Stephen Poloz also helped to limit the potential for Canadian Dollar gains.
Without the support of any fresh Canadian data releases today CAD exchange rates look set to remain on a weaker footing.
New Zealand Dollar Dented by Contracting Food Prices
November’s food price index failed to offer the New Zealand Dollar any particular encouragement yesterday as it pointed towards another month of weakening inflationary pressure. As New Zealand inflation failed to show evidence of picking up the risk of further Reserve Bank of New Zealand (RBNZ) dovishness increased, weighing down NZD exchange rates.
With investors anticipating a weak reading from November’s manufacturing PMI the New Zealand Dollar looks set to shed further ground this morning.
Data Releases
December 13th 07:30 NZD Manufacturing PMI (NOV) 49.8
December 13th 17:00 EUR German Wholesale Price Index (MoM) (NOV) 0.2%
December 13th 23:30 USD Advance Retail Sales (MoM) (NOV) 0.5%