Euro Slips on Faltering German Business Confidence

Australian Dollar (AUD) Boosted by Covid-19 Vaccine Progress

The Australian Dollar (AUD) found some support at the start of the week thanks to renewed market hopes of a potential Covid-19 vaccine as the state of Victoria exited its 112-day lockdown.

As the AstraZeneca trial vaccine was reported to produce an immune response in both young and old participants, this encouraged a fresh bout of market risk appetite which in turn supported the Australian Dollar.

Comments from Reserve Bank of Australia (RBA) policymaker Michele Bullock today could send AUD exchange rates on a fresh downtrend if they prove dovish in nature.

Pound (GBP) Support Limited despite Extended UK-EU Talks

The Pound (GBP) failed to find any major traction against its rivals during Monday’s European session even as UK-EU Brexit trade talks continued.

While talks were extended with the hope of achieving a deal, this failed to give the Pound any significant boost. Even so, as long as officials and politicians continue to make positive signals on the possibility of a deal this should limit the downside potential of GBP exchange rates.

The mood towards the Pound looks set to sour today, with forecasts pointing towards a dip in the CBI distributive trades index.

Euro (EUR) Softens as German Business Confidence Declines

The Euro (EUR) came under pressure as October’s German IFO business sentiment index weakened on the month, ending a five-month run of improvements.

As the headline index dipped from 93.2 to 92.7, this indicated that confidence among German businesses took a pessimistic turn at the start of the fourth quarter. Increasing bets that the Eurozone’s fragile economic recovery is already petering out left the single currency trending lower across the board.

Looking ahead, increasing anticipation ahead of the European Central Bank’s (ECB) policy meeting may keep the Euro on the back foot in the days ahead.

US Dollar (USD) Trends Higher amid Risk-Off Trade

The US Dollar (USD) staged fresh gains overnight as safe-haven demand for USD increased due to surging coronavirus cases and a lack of US stimulus progress soured market sentiment.

Although talks for fiscal stimulus continue, the lack of progress close to the US election weighed on market sentiment while surging global coronavirus cases added to the risk-off tone, despite more news of a vaccine breakthrough.

Demand for the US Dollar may pick up further tonight if durable goods orders are found to have grown on the month as forecast in September.

Canadian Dollar (CAD) Pressured by Fears of Oil Oversupply

The Canadian Dollar (CAD) slumped during yesterday’s session as global oil prices dipped at the start of the week.

News of an expected increase in oil production in Libya saw oil prices tumble on Monday. With the global market already oversaturated thanks to the Covid-19 crisis limiting demand for oil, the mood towards the commodity-correlated Canadian Dollar soured.

Unless prices show signs of recovery, this may keep CAD exchange rates under a degree of pressure in the near term.

New Zealand Dollar (NZD) Shored up Ahead of Trade Data

The New Zealand Dollar (NZD) benefitted from market hopes of continued progress towards a Covid-19 vaccine.

While the New Zealand economy has largely shown signs of shaking off the impact of the pandemic, the prospect of a potential vaccine still lifted demand for the New Zealand Dollar.

However, if September’s trade deficit widens as anticipated, this could see NZD exchange rates shedding their latest gains.

Data Releases

08:45 NZD Balance of Trade (Sep) –NZ$800 million
22:00 GBP CBI Distributive Trades Index (Oct) 1
23:30 USD Durable Goods Orders (Sep) 0.5%

Louisa Heath