Australian Dollar (AUD) Struggles to Benefit from Chinese Manufacturing Strength
The Australian Dollar (AUD) was subdued yesterday in spite of a solid performance from the latest Chinese manufacturing PMI.
While September’s Chinese manufacturing data pointed towards the economy continuing to recover momentum in the third quarter, a general sense of market risk aversion limited the strength of AUD exchange rates. Even though the ‘Aussie’ commonly functions as a market proxy for sentiment towards the Chinese economy, growing anxiety over political tensions in the US weighed on the antipodean currency.
The Australian Dollar may make gains, however, due to an improvement in market sentiment as hopes for new US fiscal stimulus increased after talks resumed to reach a Covid-19 relief package.
Pound (GBP) Buoyed as BoE Chief Economist Calls for Optimism
The Pound (GBP) returned to a positive footing on Wednesday in the wake of comments from Bank of England (BoE) chief economist Andy Haldane.
As Haldane emphasised the need for optimism over the UK’s economic outlook, the downside potential of GBP exchange rates eased. Markets also took encouragement from Haldane’s comments on negative interest rates, which suggested that the central bank will not cut rates in the near future.
The Pound may struggle to extend its gains tonight, with no change expected from the UK’s finalised September manufacturing PMI.
Euro (EUR) Finds Modest Support as German Unemployment Falls
The Euro (EUR) found some limited support on the back of Germany’s latest labour market data.
A surprise improvement in the German unemployment rate pointed towards an improvement in the health of the labour market. Even so, this modest improvement in employment failed to give the single currency any significant boost last night. With French inflation also falling deeper into negative territory on the month, the appeal of the Euro diminished.
EUR exchange rates could face further selling pressure as forecasts point towards an increase in the Eurozone unemployment rate.
US Dollar (USD) Mixed in Response to Chaotic Presidential Election Debate
The US Dollar (USD) saw a mixed performance in the wake of a chaotic presidential election debate, with political tensions remaining heightened.
Investors remain wary of the potential for a contested election result in November, as well as the potential for a further escalation in tensions. However, market sentiment improved slightly as Democrats and Republicans expressed hope for a new Covid-19 fiscal stimulus package as talks resumed, weighing on the safe-haven US Dollar.
Another solid performance from the ISM manufacturing PMI may offer the US Dollar support, but shifting risk sentiment is more likely to drive USD movement.
Canadian Dollar (CAD) Trends Higher as Monthly GDP Remains Strong
The Canadian Dollar (CAD) gained ground as July’s monthly gross domestic product figure delivered another robust result.
As the gross domestic product rose 3% on the month in July, this encouraged bets that the Canadian economy continued to recover at the start of the third quarter. This should limit the risk of fresh Canadian Dollar selling pressure provided that signs continue to point towards a sustained economic rebound.
If September’s manufacturing PMI shows a decent uptick, CAD exchange rates may hold onto a positive trend tonight.
New Zealand Dollar (NZD) Unable to Capitalise on Improved Business Confidence Index
The New Zealand Dollar (NZD) failed to capitalise on a better-than-expected showing from the latest ANZ business confidence index.
While the index unexpectedly improved from -41.8 to -28.5, this still points towards a level of business anxiety over the economic outlook. With the New Zealand economy looking set to remain under pressure in the months ahead, especially as political jitters in the US mount, there appears little potential for NZD exchange rate gains.
However, a stronger quarter of capacity utilisation may offer the New Zealand Dollar a leg up against its rivals this morning.
Data Releases
07:00 NZD NZIER Capacity Utilisation (Q3) 93%
09:00 AUD Manufacturing PMI (Sep) 55.5
18:30 GBP Manufacturing PMI (Sep) 54.3
19:00 EUR Eurozone Unemployment Rate (Aug) 8.1%
23:30 CAD Manufacturing PMI (Sep) 55.3
00:00 USD ISM Manufacturing PMI (Sep) 56.3