Lower-Than-Forecast Unemployment Rate Fails to Prevent Australian Dollar Losses

Australian Dollar (AUD) Slides in Risk-Off Trade and Unemployment Rate Increase

The Australian Dollar (AUD) fell out of favour yesterday amid a risk-off mood even though September’s unemployment rate proved lower than forecast.

While the unemployment rate rose to 6.9%, as opposed to 7.1%, this was still an increase on the previous month. As the jobs report also showed a sharper decline in full time employment and a weaker participation rate, a renewed sense of anxiety weighed on the Australian Dollar.

In the absence of notable data releases to close this week’s session, AUD exchange rates will continue remaining sensitive to the prevailing market risk-off tone.

Pound (GBP) Loses Footing ahead of EU Leaders Summit as UK Job Losses Rise

The Pound (GBP) saw a mixed performance on Thursday as Brexit concerns weighed on GBP sentiment ahead of the EU leaders summit and more job losses were announced in the hospitality industry.

With another UK pub chain set to axe more than 2000 jobs in response to weakening trade conditions, worries over the economic outlook picked up once again. Added to this, GBP investors remained cautious ahead of the EU leaders summit where Brexit will be in focus.

In the absence of any fresh UK data releases today, the Pound’s movement will be driven by Brexit headlines and developments that may arise from the EU summit.

Euro (EUR) Fails to Benefit from Italian Industrial Recovery

The Euro (EUR) struggled to capitalise on a better-than-expected set of Italian industrial orders figures.

While orders picked up by an impressive 15.1% on the month in August, this failed to outweigh wider fears over the prospect of a fresh Eurozone slowdown. With lockdown conditions across the currency union looking set to tighten once again the risk of a weaker fourth quarter growth performance dragged on the single currency.

As the EU leaders summit takes place, new volatility could drive EUR exchange rates as national leaders in the Eurozone discuss Brexit and how to coordinate a response to the coronavirus crisis.

US Dollar (USD) Holds Strong on Risk-Off Tone despite Gloomy Jobless Figures

The US Dollar (USD) shook off the disappointing nature of the latest set of US initial and continuing jobless claims as souring market sentiment supported safe-haven USD.

Even though US unemployment continued to trend at a historically high level, with initial jobless claims unexpectedly jumping to nearly 900K, USD exchange rates still found strength overnight.

A solid monthly increase in retail sales could add to confidence in the performance of the US economy, offering the potential for further US Dollar gains on Friday.

Canadian Dollar (CAD) Stumbles Thanks to Larger Decline in Canadian Employment

The Canadian Dollar (CAD) came under pressure on the back of September’s ADP employment change figure last night.

As employment saw an even sharper decline on the month compared to August’s reading, the strength of CAD exchange rates faltered. With the Canadian labour market looking set to struggle in the near future, investors lacked any particular reason to favour the risk-sensitive currency over its rivals at this stage.

The Canadian Dollar may face further selling pressure heading into the weekend, with forecasts pointing towards a contraction in manufacturing sales for August.

New Zealand Dollar (NZD) Remains Muted Ahead of General Election

The New Zealand Dollar (NZD) remained on the back foot yesterday as market risk appetite proved generally lacking.

With markets bracing for the outcome of the upcoming general election there appeared little incentive to pile into the ‘Kiwi’. While New Zealand appears to have largely weathered the impact of the Covid-19 crisis, worries over the global economic outlook continued to put pressure on NZD exchange rates.

Even so, the New Zealand Dollar could recover some of its lost ground this morning, with the Business NZ PMI expected to pick up solidly on the month.

Data Releases

08:30 NZD Business NZ PMI (Sep) 51.1
11:00 AUD HIA New Home Sales (Sep) 3.8%
20:00 EUR Eurozone Balance of Trade (Aug) €15.1 billion
23:30 CAD Manufacturing Sales (Aug) -1.4%
23:30 USD Retail Sales (Sep) 0.7%

Tom Hosking