Australian Dollar (AUD) Kept on Back Foot by Signs of RBA Dovishness
The Australian Dollar (AUD) remained on the back foot in the wake of comments from Reserve Bank of Australia (RBA) policymaker Christopher Kent.
As Kent indicated that the monetary policy board is considering the case for further easing, this drove AUD exchange rates lower across the board. With markets increasingly betting that an interest rate cut could be imminent, support for the ‘Aussie’ proved generally limited.
Worries over the outlook of the Australian economy look set to mount further this morning, with forecasts pointing towards a slowdown in the Westpac leading index.
Pound (GBP) Pressured by Increasing BoE Support for Negative Interest Rates
The Pound (GBP) came under renewed pressure last night as the odds of the Bank of England (BoE) cutting interest rates into negative territory appeared to increase, while continuing Brexit talks remained uncertain.
Commentary from BoE policymaker Gertjan Vlieghe prompted a bout of Pound selling as he indicated an openness to considering the case for negative interest rates. As the BoE looks increasingly likely to implement further monetary loosening before the end of the year, even if not a rate cut, there was little incentive for investors to buy into the Pound.
GBP exchange rates may find a rallying point this evening, however, with forecasts suggesting an uptick in the headline UK inflation rate.
Euro (EUR) Gains on Risk-On Mood and USD Weakness
The Euro (EUR) made solid gains during the European session due to upbeat trade and USD weakness ahead of news on US stimulus progress.
EUR exchange rates also found support in the improved nature of September’s German producer price index. With the index showing growth of 0.4% on the month, as opposed to the forecast -0.1% decline, this gave EUR exchange rates a solid boost.
Even so, fresh commentary from European Central Bank (ECB) policymakers could see the single currency fall out of favour once again overnight.
US Dollar (USD) Volatile on US Stimulus Hopes
The US Dollar (USD) trended lower as market sentiment held hope of an agreement on US stimulus between Republicans and Democrats.
Hopes that officials could push through a fiscal stimulus package ahead of the presidential election stoked volatility in USD exchange rates. Meanwhile, the US Dollar failed to capitalise on an unexpectedly sharp uptick in US building permits on the month.
If the prospect of stimulus falls through entirely this could see the US Dollar volatility over the course of the day.
Canadian Dollar (CAD) Under Pressure due to Lack of OPEC Agreement
The Canadian Dollar (CAD) struggled to find upward momentum overnight after the latest OPEC meeting ended without any firm agreement on output cuts.
Growing anxiety over the possibility of a global oversupply glut left the commodity-correlated Canadian Dollar on the back foot, with oil prices falling once again. As long as the Covid-19 crisis looks set to stifle global demand for oil, a lack of fresh production cuts looks set to keep prices under pressure, limiting the strength of CAD exchange rates.
Further losses could be in store for the Canadian Dollar tonight if September’s monthly inflation rate remains in negative territory as anticipated.
New Zealand Dollar (NZD) Slips as Election Impact Fades
The New Zealand Dollar (NZD) was unable to hold onto its positive footing as the impact of Sunday’s election results faded.
As the possibility of further monetary loosening measures from the Reserve Bank of New Zealand (RBNZ) remain on the table, support for NZD exchange rates weakened. The appeal of the risk-sensitive New Zealand Dollar proved limited as market confidence faded in the face of growing doubts over the possibility of US fiscal stimulus.
Growing anticipation ahead of Thursday’s inflation data could see the New Zealand Dollar struggle to regain any of its lost traction in the near term.
Data Releases
11:30 AUD Westpac Leading Index (Sep) 0.2%
17:00 GBP Consumer Price Index (Sep) 0.5%
22:30 CAD Consumer Price Index (Sep) -0.1%