UK Chancellor’s New Jobs Plan Fails to Lift Pound

Australian Dollar (AUD) Trends near Monthly Lows

The Australian Dollar (AUD) remained under pressure yesterday, trending near monthly lows as a result of depressed market risk appetite.

With confidence in the outlook of the global economy still weakening, investors saw little reason to favour the ‘Aussie’ at this stage. A lack of fresh domestic data left AUD exchange rates lacking in any particular form of support, even though Australia has shown greater evidence of curbing the spread of Covid-19 infections than some other nations.

The Australian Dollar is unlikely to recover any significant ground in the near term as long as a sense of anxiety continues to dominate markets.

Pound (GBP) Momentum Fades after Chancellor Unveils ‘Winter Economy Plan’

The Pound (GBP) struggled to hold onto its initial bout of optimism in the wake of Chancellor Rishi Sunak’s announcement of his ‘winter economy plan’.

Some investors expressed disappointment that Sunak did not go further, with the current furlough scheme replaced by a pledge to cover 22% of pay for workers in ‘viable’ jobs over the next six months. While this move could still help to stem a potential surge in joblessness once the furlough scheme ends, GBP exchange rates lost some of their early gains after the speech.

September’s GfK consumer confidence index is unlikely to offer the Pound a rallying point today as forecasts point towards another distinctly negative reading.

Euro (EUR) Falters as German Business Sentiment Misses Forecast

The Euro (EUR) failed to benefit from the latest set of German IFO business sentiment indexes as confidence failed to pick up as far as forecast.

Although both the business climate and expectations measures showed an improvement on the month in September, this was not enough to boost EUR exchange rates. Markets remain wary of the potential for a fresh collapse in confidence across the Eurozone as the German economy looks set to come under further pressure in the coming months.

A special meeting of the European Council could provoke additional volatility for the Euro during today’s European session.

US Dollar (USD) Shakes off Higher-Than-Forecast Jobless Claims

The US Dollar (USD) held onto a solid footing against its rivals overnight even as the latest set of jobless claims figures missed forecasts.

As initial jobless claims saw a larger increase on the week than forecast, clocking in at 870,000 to surpass the previous week’s reading of 866,000, this raised fresh doubt over the state of the labour market. A lack of progress towards fresh fiscal stimulus measures, which are currently mired in political tensions and could see unemployment continue to rise, failed to dent the US Dollar.

However, a softer month of growth in durable goods orders may give investors less incentive to favour the US Dollar tonight.

Canadian Dollar (CAD) Benefits from Promise of Further Fiscal Spending

The Canadian Dollar (CAD) found some support in the wake of comments from Prime Minister Justin Trudeau, who offered assurance that the government will increase fiscal spending.

The prospect of further support for the Canadian economy and struggling businesses helped to put a floor under CAD exchange rates. Although average weekly earnings saw a smaller increase on the year in July, this did not put any particular pressure on the Canadian Dollar.

Greater movement could be in store for CAD exchange rates with the release of July’s budget balance, with markets expecting to see a narrowing of the deficit.

New Zealand Dollar (NZD) Muted amid Risk Aversion

The New Zealand Dollar (NZD) saw limited strength on Thursday as the impact of the Reserve Bank of New Zealand’s (RBNZ) meeting faded.

With a sense of risk aversion still largely dominating markets there appeared little room for the New Zealand Dollar to push higher against the majors. As long as the risk of a second wave of Covid-19 infections looks set to weigh on the global economy, the risk-sensitive ‘Kiwi’ looks set to remain on the back foot.

In the absence of any New Zealand data releases, NZD exchange rates could struggle to gain any ground unless a sense of confidence returns to markets.

Data Releases

09:01 GBP GfK Consumer Confidence Index (Sep) -27
22:30 USD Durable Goods Orders (Aug) 1.5%
01:00 CAD Budget Balance (Jul) C$-31 billion

Louisa Heath