Australian Dollar Buoyed as RBA Suggests End of Recession

Australian Dollar (AUD) Rallies as RBA Signals End of Recession

The Australian Dollar (AUD) saw an improved mood after the Reserve Bank of Australia (RBA) signalled that the country’s recession is likely over.

Investors were caught off guard by the positive assessment, even though deputy governor Guy Debelle still warned that the economy faces challenges in the coming months. Although the RBA remains poised to enact further monetary loosening measures before the end of the year, this was not enough to keep the Australian Dollar from rallying yesterday.

An improvement in the third quarter inflation rate could encourage AUD exchange rates to gain further ground over the course of the day.

Pound (GBP) Gains Limited as UK Retail Goes into Decline

The Pound (GBP) was mixed in the wake of October’s CBI distributive trades index and its disappointing decline.

As the headline index dropped from 11 to -23, this signalled a significant slowdown for the UK retail sector at the start of the fourth quarter. Given that stronger levels of consumer spending and retail activity have previously helped to shore up the UK economy, this decline left GBP exchange rates with limited support overnight.

Speculation over the outcome of ongoing UK-EU Brexit trade talks could provoke additional volatility for the Pound in the near term.

Euro (EUR) Stumbles as Spanish Unemployment Soars

The Euro (EUR) softened during Tuesday’s European session after a higher-than-expected Spanish unemployment rate.

Unemployment climbed to 16.26% in the third quarter, highlighting the extent of the challenges facing the Spanish economy as the impact of the Covid-19 crisis continues to unfold. Added to this, the prospect of further lockdown measures across the currency union added to the bearish picture.

If Eurozone governments resort to tighter Covid-19 restrictions, the prospect of a fresh economic slowdown could weigh heavily on the single currency.

US Dollar (USD) Struggles despite Durable Goods Orders Growth

The US Dollar (USD) failed to capitalise on a solid improvement in September’s durable goods orders figure, even as orders strengthened 1.9% on the month.

While this improvement suggests a greater level of resilience within the US economy, the upcoming election and fading US fiscal stimulus hopes left USD investors cautious amid uncertainty.

However, with forecasts pointing towards a narrowing of September’s advance goods trade deficit the US Dollar could find some renewed demand tonight.

Canadian Dollar (CAD) Recovers Thanks to Gulf of Mexico Oil Shutdown

The Canadian Dollar (CAD) recovered some ground as the general sense of market risk appetite saw improvement last night.

News that a hurricane had prompted the shutdown of oil rigs in the Gulf of Mexico helped to push oil prices higher once again on Tuesday. While worries over global oversupply lingered, this was not enough to keep prices from staging an uptrend, lifting the commodity-correlated Canadian Dollar against its rivals.

CAD exchange rates may struggle to hold onto a stronger footing as anticipation mounts for the Bank of Canada’s (BoC) policy announcement.

New Zealand Dollar (NZD) Trends Higher on Risk Appetite

The New Zealand Dollar (NZD) found traction yesterday as investors adopted a more risk-positive outlook.

Despite markets remaining wary of the prospect of increasing Covid-19 restrictions in Europe, risk appetite improved again. Stronger commodity prices and a weaker US Dollar both helped to shore up the appeal of the New Zealand Dollar.

A lack of fresh New Zealand data releases could limit the potential for further NZD exchange rate gains, barring a continued improvement in market risk appetite.

Data Releases

11:30 AUD Inflation Rate (Q3) 0.7%
23:30 USD Advance Goods Trade Balance (Sep) -$80 billion
01:00 CAD Bank of Canada Rate Decision 0.25%

Louisa Heath