Surprise Unemployment Rate Improvement Boosts Australian Dollar
AUD exchange rates pushed higher across the board yesterday after a surprise improvement in November’s unemployment rate, which dipped from 5.3% to 5.2%. As both full time and part time employment showed a solid uptick on the month this helped to lower the unemployment rate as the labour market tightened. This unexpected improvement could give the Reserve Bank of Australia (RBA) incentive not to cut interest rates in the near future, boosting the appeal of the Australian Dollar.
Even so, any deterioration in market risk appetite could still dent AUD exchange rates heading into the weekend.
Dovish BoE Tilt Leaves Pound Under Pressure
While markets widely expected the Bank of England (BoE) to leave interest rates on hold at its December meeting this failed to prevent the Pound trending lower in the wake of the announcement. As two policymakers voted in favour of an immediate interest rate cut GBP exchange rates were left vulnerable to renewed selling pressure as investors see an increased risk of a 2020 cut. A monthly decline in retail sales also put a dampener on the Pound.
With the GfK consumer confidence index expected to remain at -14 in December GBP exchange rates look set to fall further away from their post-election highs.
Rising French Business Confidence Encourages Euro
An unexpectedly improved French business confidence index offered a boost to EUR exchange rates during Thursday’s European session. As the index clocked in at 102 for two months in a row this encouraged hopes that the French economy could demonstrate greater resilience in the fourth quarter. While markets still remain wary of the potential for a fresh German slowdown this positive data was enough to shore up the Euro against its weaker rivals.
If the latest German GfK consumer confidence index shows an improvement on the month this could keep EUR exchange rates on a stronger footing.
Disappointing Manufacturing Data Weighs Down US Dollar
December’s Philadelphia Fed manufacturing index fell short of forecast, dropping from 10.4 to just 0.3 as the sector saw a fresh slowdown. This weaker showing suggests that the world’s largest economy continued to lose momentum in the final month of the year, raising the odds of a softer fourth quarter gross domestic product. Coupled with a sharp uptick in initial jobless claims this dragged USD exchange rates lower last night.
With no change forecast for the finalised third quarter gross domestic product the potential for a US Dollar rally appears limited in the near term.
Canadian Dollar Falters as Wage Growth Eases
The mood towards the Canadian Dollar soured overnight thanks to a disappointing average weekly earnings figure. As wage growth slowed from 4.0% to 3.3% on the year this cast a shadow over CAD exchange rates, with weaker wage growth likely to encourage increased Bank of Canada (BOC) dovishness. Although the ADP employment change reading saw a solid improvement on the month this was not enough to prevent the Canadian Dollar weakening.
A stronger month of retail sales may help CAD exchange rates to recover some of their lost ground ahead of the weekend, though.
Accelerating Growth Rate Lifts New Zealand Dollar
As the third quarter gross domestic product accelerated in line with forecasts the mood towards the New Zealand Dollar improved. With the year-on-year growth rate hitting 2.3% confidence in the underlying strength of the New Zealand economy picked up. A surprise surge in the quarterly growth rate added to the bullish mood, keeping NZD exchange rates on a stronger footing.
However, any weakening of December’s ANZ consumer confidence index could still see the appeal of the New Zealand Dollar diminish.
Data Releases
December 20th 07:00 NZD ANZ Consumer Confidence Index (DEC) 119
December 20th 10:01 GBP GfK Consumer Confidence Index (DEC) -14
December 20th 17:00 EUR German GfK Consumer Confidence Index (JAN) 9.8
December 20th 23:30 CAD Retail Sales (MoM) (OCT) 0.5%
December 20th 23:30 USD Annualised Gross Domestic Product (3Q F) 2.1%