Slowing Momentum in US Goods Orders Fails to Prevent US Dollar Gains

Australian Dollar (AUD) Under Pressure as Risk Appetite Fails to Return

The Australian Dollar (AUD) saw little in the way of support even as the latest US data fell short of expectations.

Although the US economy showed fresh signs of slowing in the face of the Covid-19 crisis, this failed to bolster demand for the Australian Dollar as market confidence faded again. The resilient strength of the US Dollar kept the risk-sensitive ‘Aussie’ on the back foot, reversing the limited gains AUD exchange rates had made on Thursday.

If the Chinese economy continues to show signs of improvement, on the other hand, this may offer the ‘Aussie’ a leg up against its rivals.

Pound (GBP) Muted as Worries over Likely UK Job Losses Grow

The Pound (GBP) struggled to maintain positive momentum heading into the weekend as markets bet on the potential for an imminent wave of UK job losses.

GBP investors were largely disappointed by the nature of the fiscal support announced in Chancellor Rishi Sunak’s Winter Economic Plan, with the new wage subsidy falling short of the furlough scheme. With the UK looking set to face a significant number of job losses in the final quarter of the year, the Pound came under renewed pressure against its rivals.

The latest developments surrounding the UK government’s response to the spike in Covid-19 infections could provoke further Pound volatility in the days ahead.

Euro (EUR) Fails to Benefit from Improved Italian Business Confidence

The Euro (EUR) failed to capitalise on an unexpectedly strong improvement in Italian business confidence on Friday.

The Euro failed to find support as the impact of rising coronavirus cases on the Eurozone’s economy offset Italian data of businesses and consumers improving sentiment. As August’s French unemployment benefit claims figure proved higher than forecast, this offered fresh evidence of the challenges facing the Eurozone as the pandemic rumbles on.

As long as investors see reason to doubt the resilience of the Eurozone economy, the prospect of further European Central Bank (ECB) action looks set to weigh on EUR exchange rates.

US Dollar (USD) Climbs despite Weak Durable Goods Orders

The US Dollar (USD) managed to shake off the underwhelming nature of August’s durable goods orders figure.

While forecasts had pointed towards goods orders losing some of their momentum following July’s sharp 11.2% uptick, the data still fell short of expectations. Growth of just 0.4% on the month suggests that orders came under significant pressure in August, fuelling worries over the economic outlook. Even so, amid risk-off trade the downside potential of USD exchange rates proved limited.

The US Dollar will likely continue being driven by safe-haven demand through today, although a softening Dallas Fed manufacturing index could cause some jitters if it suggests the world’s largest economy is slowing.

Canadian Dollar (CAD) Pushes Higher Thanks to Narrowed Budget Deficit

The Canadian Dollar (CAD) trended higher in the wake of July’s budget balance announcement, as the figures bettered forecast.

As the deficit narrowed further than anticipated, from -33.58 billion to -28.23 billion, confidence in the outlook of the Canadian economy improved. While the deficit remains significant, investors were pleased that the balance is moving in the correct direction, even though the possibility of further fiscal spending to come could derail this trend.

However, any renewed weakness in the oil market may easily knock the Canadian Dollar onto a fresh downtrend.

New Zealand Dollar (NZD) Gains Ground on Vulnerable Rivals

The New Zealand Dollar (NZD) was able to gain ground against some of its weaker rivals on Friday, in spite of a lack of domestic data.

NZD exchange rates found some support ahead of the weekend, even in the absence of any supportive New Zealand data. Although the possibility of further action from the Reserve Bank of New Zealand (RBNZ) looms in the months ahead, markets have already largely priced the prospect of further monetary policy action into the ‘Kiwi’.

As domestic data releases look set to remain thin on the ground in the near term, any resurgence in risk aversion could weigh heavily on the New Zealand Dollar.

Data Releases

00:30 USD Dallas Fed Manufacturing Index (Sep) 5

Louisa Heath