Australian Dollar (AUD) Struggles as Retail Sales Decline
The Australian Dollar (AUD) slipped against its rivals yesterday after September’s final retail sales figure showed another month of contraction as consumers showed increasing caution at the end of the third quarter.
While the Chinese services PMI performed well, this failed to shore up AUD exchange rates in the face of rising market risk aversion, driven by the lack of certainty over the US presidential election result.
Looking ahead, the appeal of the Australian Dollar may remain limited as a result of US election jitters, even if the trade surplus widens for September.
Pound (GBP) Slides on Weaker UK Services PMI
The Pound (GBP) came under increasing pressure on Wednesday after the finalised UK services PMI for October saw a surprise downward revision.
As the index fell from 56.1 to 51.4 at the start of the fourth quarter, this cast a fresh shadow over the future of the UK economy. This sharp slowdown in growth momentum suggests that the economy is in store for an even greater weakening in the months ahead.
Ahead of the Bank of England (BoE) policy announcement the Pound could struggle to find support, given expectations of a dovish message.
Euro (EUR) Fails to Benefit from Better-than-Expected Services PMI
The Euro (EUR) proved largely muted during yesterday’s European session, even after October’s final Eurozone services PMI saw a slight upward revision indicating a smaller contraction than initially forecast.
The relative strength of the US Dollar also put pressure on EUR exchange rates overnight, as markets weighed up the unfolding results of the US presidential election.
Meanwhile, a positive month of growth for German factory orders may offer the single currency a rallying point this evening.
US Dollar (USD) Jumps amid Election Outcome Uncertainty
The US Dollar (USD) outperformed its rivals last night as safe-haven demand grew in response to the uncertain election outcome.
With the race proving tighter than markets had anticipated, USD exchange rates were encouraged to trend higher across the board, benefitting from renewed investor anxiety. As the expected ‘Blue Wave’ failed to materialise, the result appears unlikely to be known for some days, boosting the US Dollar in spite of the negative implications for the US economy.
Even so, anticipation ahead of the Federal Reserve’s November policy announcement could put something of a dampener on the US Dollar.
Canadian Dollar (CAD) Softens on Widened Trade Deficit
The Canadian Dollar (CAD) stumbled as September’s trade figures showed a larger widening of the deficit than expected.
Support for the Canadian Dollar weakened as the deficit grew from C$-2.45 billion to -C$3.25 billion, indicating the vulnerability of the economy to deteriorating global trade. With markets in a nervous state thanks to the inconclusive nature of the US election, there appeared little reason to favour the Canadian Dollar last night.
Added to this, any fresh weakness in the global oil market could drive CAD exchange rates lower in the near term.
New Zealand Dollar (NZD) Under Pressure Thanks to Rising Unemployment Rate
The New Zealand Dollar (NZD) saw limited support yesterday as the third quarter unemployment rate spiked to 5.3%.
Although forecasts had suggested a slightly higher reading of 5.4%, this still undermined confidence in the health of the New Zealand economy. However, as the corresponding participation rate also saw a modest uptick on the quarter, this helped limit the negative impact of the jobs data.
Further support could be in store for the ‘Kiwi’ as long as November’s ANZ business confidence index shows an improvement, pushing closer to positive territory.
Data Releases
11:00 NZD ANZ Business Confidence (Nov) -15
11:30 AUD Balance of Trade (Sep) A$2.1 billion
18:00 EUR Germany Factory Orders (Sep) 2%
23:00 GBP Bank of England Rate Decision 0.1%
06:00 USD Federal Open Market Committee Rate Decision 0.25%