Trump’s Positive Covid-19 Test Weighs on Australian Dollar

Australian Dollar (AUD) Retreats as Retail Sales Crumble

The Australian Dollar (AUD) fell out of favour ahead of the weekend thanks to a sharp monthly decline in retail sales growth.

As sales contracted -4% on the month in August, this raised fresh doubts over the strength of the wider economic outlook, with lower levels of consumer spending set to weigh on activity. Meanwhile, a general deterioration in market risk appetite put additional pressure on AUD exchange rates in the wake of news that Donald Trump had tested positive for Covid-19.

If the NAB business confidence index deteriorates further in September as forecast, this could see the Australian Dollar shedding further ground today.

Pound (GBP) Buoyed by Optimism over UK-EU Talks

The Pound (GBP) was able to return to a positive footing against its rivals on Friday, in spite of the lack of breakthrough in UK-EU talks.

The Pound received a fresh boost as German Chancellor Angela Merkel noted that she remains optimistic that a deal can be reached so long as negotiations are ongoing. While it remains to be seen whether the two sides can overcome their differences to reach a deal, GBP exchange rates adopted a positive outlook heading into the weekend.

However, any negative revision to September’s finalised UK services PMI could see the Pound come under renewed pressure as confidence in the economic outlook falls.

Euro (EUR) Trends Lower as Eurozone Inflation Weakens

The Euro (EUR) slipped in the wake of September’s weaker-than-expected Eurozone consumer price index.

As the headline inflation rate dipped from -0.2% to -0.3% on the year, this offered investors fresh cause for caution. With inflation continuing to trail far below the European Central Bank’s (ECB) 2% target, the chances of further monetary stimulus to come appeared to increase, dragging the single currency lower against its rivals.

Confirmation that the Eurozone service sector experienced a contraction last month may add to the bearish outlook of EUR exchange rates.

US Dollar (USD) Under Pressure on Disappointing Payrolls Report

The US Dollar (USD) struggled to find any particular traction against its rivals on Friday as the latest non-farm payrolls report missed forecasts as just 661,000 new jobs were added to the US economy last month, as opposed to the 850,000 anticipated, undermining confidence in the strength of the economic recovery.

Even though the corresponding unemployment rate fell from 8.4% to 7.9%, bettering forecasts, this was due to a larger number of workers leaving the job market. Added to the anxiety over Trump contracting coronavirus a month before the election, this left the US Dollar on the back foot.

Signs of slowdown in the ISM non-manufacturing PMI could keep USD exchange rates under a degree of pressure this evening.

Canadian Dollar (CAD) Slides Thanks to Fresh Oil Price Decline

The Canadian Dollar (CAD) remained under pressure as oil prices experienced another day of declines in response to Trump’s Covid-19 diagnosis.

Investors were spooked by the prospect of increased uncertainty heading into the November presidential election, weighing heavily on the oil market and various commodity-correlated currencies. With markets in a generally risk-off mentality, the Canadian Dollar saw little in the way of support at the end of the week.

If market sentiment takes a turn for the positive, though, this may offer the Canadian Dollar room to trend higher in the near term.

New Zealand Dollar (NZD) Weakens as Risk Appetite Fades

The New Zealand Dollar (NZD) saw weakness on Friday thanks to the wide deterioration in global market sentiment.

With investors bracing against the potential of fresh political turmoil in the US, the appeal of higher-yielding assets naturally decline. This left the New Zealand Dollar on the back foot against many of the majors, with a lack of fresh domestic data hampering its ability to make gains.

Unless risk appetite recovers today, NZD exchange rates may struggle to return to a positive footing.

Data Releases

10:30 NAB Business Confidence (Sep) -10
18:00 EUR Eurozone Services PMI (Sep) 47.6
18:30 GBP Services PMI (Sep) 55.1
00:00 USD ISM Non-Manufacturing PMI (Sep) 56

Louisa Heath