Australian Dollar Slips despite Stronger Inflation

Australian Dollar (AUD) Sees Limited Support in spite of Inflation Uptick

The Australian Dollar (AUD) struggled to benefit from a better-than-expected 1.6% uptick in the quarterly consumer price index, up from the second quarter’s -1.9% reading.

As markets still expect to see the Reserve Bank of Australia (RBA) cut interest rates before the end of the year, the positive impact of the inflation data proved limited. Growing global anxiety over a second wave of Covid-19 infections also dented market risk appetite.

Even so, the ‘Aussie’ could find modest support this morning as long as the third quarter export price index shows a solid improvement, but AUD exchange rates will continue remaining sensitive to risk sentiment.

Pound (GBP) Mixed as Pressure Grows to Tighten Covid-19 Restrictions

The Pound (GBP) saw a mixed performance against its rivals as the UK government came under fresh pressure to implement another national lockdown.

With the UK death toll having passed 60,000, the chances of tighter social restrictions appeared to rise in spite of the government’s previous resistance to the prospect of another lockdown. As further disruption threatens the UK economy and fourth quarter growth, GBP investors remain cautious.

In the absence of notable economic data releases, souring market sentiment and any news regarding Brexit talks continuing in Brussels will likely drive movement in GBP exchange rates.

Euro (EUR) Under Pressure as Eurozone Economies Return to Lockdown

The Euro (EUR) stumbled during yesterday’s European session as both France and Germany prepared for a tightening of lockdown conditions in response to rising Covid-19 infections.

With both of the Eurozone’s largest economies preparing to enter partial lockdowns in November, fears of a fresh slowdown in economic momentum picked up. As tighter social restrictions could easily push both France and Germany into a state of reverse, this weighed heavily on demand for the Euro last night.

Fresh signs of dovishness at the European Central Bank’s (ECB) policy announcement could see the single currency fall further out of favour tonight.

US Dollar (USD) Surges in Risk-Off Trade as US Stimulus Collapses

The US Dollar (USD) gained ground against many of the majors even as US officials admitted defeat over pushing through an imminent fiscal stimulus package.

With no fiscal stimulus now in the pipeline, market sentiment and the outlook of the US economy soured. Added to this, the threat of more lockdown measures around the world weighed on risk appetite, boosting safe-haven demand for the US Dollar.

A sharp uptick in the third quarter US gross domestic product could offer USD exchange rates additional support overnight as election jitters and political uncertainty persist.

Canadian Dollar (CAD) Slips Thanks to BOC’s Dovish Outlook

The Canadian Dollar (CAD) remained on the back foot in the wake of the Bank of Canada’s (BOC) policy announcement.

Although the BOC began to rein in the pace of its quantitative easing programme, this failed to encourage CAD exchange rates. The overall tone of the central bank’s message proved dovish in nature, with policymakers expecting to see inflation remain below its 2% target until 2023 and interest rates expected to remain on hold for the foreseeable future.

Unless August’s average weekly earnings data shows a solid improvement on the month, the Canadian Dollar may struggle to return to a positive footing this week.

New Zealand Dollar (NZD) Weakens amid Global Covid-19 Worries

The New Zealand Dollar (NZD) was mixed as global anxiety over rising Covid-19 infections encouraged investors to pile back into safe-haven assets.

While New Zealand itself still appears relatively insulated from the second wave of infections, the ‘Kiwi’ remained vulnerable to deteriorating global sentiment. The collapse of US fiscal stimulus talks also put pressure on NZD exchange rates last night, with election jitters still limiting market confidence.

However, if the ANZ business confidence index picks up as forecast, the New Zealand Dollar could find some degree of support this morning.

Data Releases

11:00 NZD ANZ Business Confidence Index (Oct) -14.5
11:30 AUD Export Prices (Q3) 1.8%
20:30 GBP Mortgage Approvals (Sep) 76,112
23:30 CAD Average Weekly Earnings (Aug)
23:30 USD Gross Domestic Product (Q3) 31%
23:45 EUR European Central Bank Rate Decision 0%

Louisa Heath