Australian Dollar (AUD) Shakes off Disappointing Manufacturing PMI
The Australian Dollar (AUD) saw some modest support after a slight disappointment from September’s final manufacturing PMI reading.
The downside potential of the Australian Dollar proved limited as the data still points towards a solid monthly performance from the manufacturing sector. At the same time, a general improvement in market sentiment also offered support to the ‘Aussie’.
However, with this morning’s retail sales data set to deliver a sharp contraction on the month, the mood towards the Australian Dollar looks likely to sour.
Pound (GBP) Fluctuates Thanks to Latest Brexit Developments
The Pound (GBP) came under significant pressure last night after the EU initiated legal action against the UK over its controversial internal market bill.
Investors were spooked by the move, even though any outcome could take some months to materialise. Demand for the Pound soon picked up again thanks to reports that the UK and EU are drawing closer to a trade deal, despite the EU’s legal move. Even so, with the odds of a deal still up in the air, GBP exchange rates continued to experience volatility throughout the European session.
If a breakthrough fails to materialise the Pound looks set to continue its volatile trading heading into the weekend.
Euro (EUR) Demand Limited as Eurozone Unemployment Rises
The Euro (EUR) struggled to find much traction as August’s Eurozone unemployment rate picked up to 8.1%.
As unemployment continued to pick up, in spite of the initial bounce back from the lockdown recession, worries over the outlook of the Eurozone economy persisted. Markets were particularly concerned by rising youth unemployment, which points towards a building crisis within the currency union.
Another negative Eurozone consumer price index reading could see the Euro trending lower, given the increasing odds of further European Central Bank (ECB) policy action.
US Dollar (USD) Sees Limited Support on Hopes of Fiscal Stimulus
The US Dollar (USD) saw mixed performance in response to hopes that a fresh round of fiscal stimulus may be on the table.
Reports of constructive talks between Republican and Democrat representatives stoked hopes that stimulus could come through before the presidential election. However, subsequent comments appeared to reduce the odds of any imminent agreement, undermining the earlier sense of optimism. With market risk appetite encouraged by the move, though, support for the US Dollar proved limited.
However, if the non-farm payrolls report shows an improvement in the unemployment rate, this could offer USD exchange rates a stronger rallying point tonight.
Canadian Dollar (CAD) Trends Lower as Oil Prices Slump
The Canadian Dollar (CAD) struggled to capitalise on a better-than-expected manufacturing PMI overnight.
CAD exchange rates failed to benefit from the PMI’s stronger reading, which showed solid growth momentum in manufacturing. Instead, a collapse in the price of Brent crude fuelled a sell-off for the commodity-correlated currency, with prices sinking 4% on the day in response to the latest global oversupply concerns.
The Canadian Dollar will likely remain on the back foot as long as oil markets are under pressure.
New Zealand Dollar (NZD) Shored Up by Wider Market Optimism
The New Zealand Dollar (NZD) pushed higher against many of the majors yesterday, benefitting from a renewed sense of market risk appetite.
Hopes of possible fiscal stimulus in the US and a possible UK-EU deal encouraged investors to pile into higher-yielding assets. This gave the ‘Kiwi’ a solid leg up against its rivals, in spite of an absence of supportive domestic data.
However, with forecasts pointing towards a slight drop in the ANZ Roy Morgan consumer confidence index, the New Zealand Dollar may not hold onto its positive footing today.
Data Releases
07:00 NZD ANZ Roy Morgan Consumer Confidence (Sep) 99.9
11:30 AUD Retail Sales (Aug) -4.2%
19:00 EUR Eurozone Consumer Price Index (Sep) -0.2%
22:30 USD Unemployment Rate (Sep) 8.2%