Australian Dollar (AUD) Slips as RBA Maintains Cautious Outlook
The Australian Dollar (AUD) came under increased pressure in the wake of comments from Reserve Bank of Australia (RBA) deputy governor Guy Debelle.
Investors were caught off guard as Debelle mentioned that the central bank is carefully monitoring the Australian Dollar, seeming to raise the possibility of intervention down the line. This pushed AUD exchange rates lower, especially as the comments also highlighted the potential for another interest rate cut.
Unless the latest Australian manufacturing PMI reading can deliver an uptick on the month, the antipodean currency looks set to remain on the back foot today.
Pound (GBP) Limits Losses as BoE Governor Talks Down Negative Interest Rate Chances
The Pound (GBP) tempered some of its losses as Bank of England (BoE) Governor Andrew Bailey talked down the possibility of negative interest rates.
The Pound received a boost against its rivals as Bailey dismissed the suggestion the BoE is currently considering negative rates. However, GBP exchange rates struggled to hold onto an uptrend for long once Boris Johnson announced a fresh set of Covid-19 restrictions.
Any softening of the UK services PMI could weigh heavily on demand for the Pound, given that the sector accounts for more than three quarters of UK GDP.
Euro (EUR) Falters despite Improved Eurozone Consumer Confidence
The Euro (EUR) failed to maintain its strength even though September’s Eurozone consumer confidence index saw an unexpected improvement.
While the index picked up from -14.7 to -13.9 on the month, the single currency still faltered during Tuesday’s European session. As the level of confidence remains significantly below its pre-crisis levels, the reading still highlighted the impact that Covid-19 continues to have on Eurozone sentiment.
Further losses may be in store for the Euro unless the Eurozone manufacturing and services PMIs remain in positive territory, fuelling bets of a resilient third quarter growth rate.
US Dollar (USD) Remains Strong Thanks to Covid-19 Concerns
The US Dollar (USD) continued to benefit from the general sense of market risk-aversion overnight as Covid-19 anxiety dominated.
With investors fearful of another potential slowdown in global growth the appeal of the safe-haven US Dollar remained heightened. An unexpected improvement in the Richmond Fed manufacturing index added to the bullish trend, suggesting a greater level of resilience within the sector at the end of the third quarter. Although Federal Reserve Chair Jerome Powell reiterated the central bank’s plan to support the economy ‘for as long as it takes’, this failed to weigh on USD exchange rates.
A solid performance from the latest US manufacturing PMI could encourage the US Dollar to hold onto its gains.
Canadian Dollar (CAD) Weighed Down by Oil Market Weakness
The Canadian Dollar (CAD) remained on a weaker footing as the potential impending return of Libyan oil supplies weighed on the oil market.
Prices slipped as fears of another oversupply glut picked up, spurred by the rising likelihood of a fresh slowdown in global demand. With a second wave of Covid-19 infections set to damage the fragile signs of economic recovery the chances of another decline in manufacturing production pushed oil prices lower, to the detriment of the Canadian Dollar.
In the absence of fresh domestic data CAD exchange rates look set to maintain a muted outlook today, unless the oil market sees any significant turnaround.
New Zealand Dollar (NZD) Under Pressure Ahead of RBNZ Announcement
The New Zealand Dollar (NZD) struggled to find support against its rivals amid market risk aversion and speculation ahead of the Reserve Bank of New Zealand (RBNZ) rate decision.
With global anxiety over resurgent Covid-19 infection numbers rising there appeared little reason to buy into the New Zealand Dollar yesterday. Although no action is expected from the RBNZ this afternoon, any fresh signs of dovishness from policymakers could still weigh on NZD exchange rates.
As long as the RBNZ remains willing to enact further monetary loosening measures the potential for ‘Kiwi’ gains will remain limited.
Data Releases
09:00 AUD Manufacturing PMI (Sep) 53.4
12:00 NZD Reserve Bank of New Zealand Rate Decision 0.25%
18:00 EUR Eurozone Manufacturing PMI (Sep) 51.9
18:30 GBP Services PMI (Sep) 56
23:45 USD Manufacturing PMI (Sep) 53.1