Australian Dollar (AUD) Shored Up in spite of RBA Caution
The Australian Dollar (AUD) pushed higher during Friday’s session on improved market sentiment despite an element of caution present in the Reserve Bank of Australia’s (RBA) latest Statement on Monetary Policy.
The Australian Dollar found support as the RBA revised up its growth forecast for the Australian economy, from -6% to -4%. However, policymakers also warned of increasing downside risks facing the economy in the months ahead, indicating that any interest rate hike remains a distant prospect.
Ahead of tomorrow’s Chinese inflation data, though, the Australian Dollar will likely remain sensitive to market sentiment.
Pound (GBP) Mixed on Continued Brexit Uncertainty
The Pound (GBP) was mixed going into the weekend as progress in Brexit UK-EU trade talks appeared to have stalled, with a senior EU official commentating that there is a ‘50/50’ chance of a deal.
However, Sterling continued gaining against the US Dollar, with market sentiment improving as Joe Biden took the lead in the race to the presidency.
Brexit uncertainty will likely continue driving movement through today’s session ahead of the UK’s latest unemployment rate figures, which are forecast to rise again.
Euro (EUR) Bolstered as German Industrial Production Rises
The Euro (EUR) gained traction even as September’s German industrial production figure failed to strengthen as forecast, with the single currency benefitting from USD weakness.
While industrial production did not pick up as sharply as expected, investors were still impressed by the 1.6% monthly jump in output. Following underwhelming September factory orders figures, this helped to limit anxiety over the health of the German manufacturing sector.
With the German trade surplus forecast to widen sharply in September, the mood towards the Euro seems on track to improve further this evening.
US Dollar (USD) Weighed Down by Election Speculation
The US Dollar (USD) remained under pressure ahead of the weekend even as the latest US unemployment rate showed a sharp improvement, falling from 7.9% to 6.9% in October.
Focus instead remained on the drawn out US election process. With the Senate on course for a potentially equal divide, and Biden narrowly increasing his lead in key states, market sentiment improved.
Until the outcome of the US election is finally clear, this looks set to keep the US Dollar volatile.
Canadian Dollar (CAD) Gains Limited as Unemployment Rate Improves
The Canadian Dollar (CAD) saw limited gains on the back of a smaller-than-expected improvement in October’s unemployment rate.
As unemployment only fell from 9% to 8.9% on the month, this limited the data’s positive impact on CAD exchange rates. Even so, an improved participation rate and a softening US Dollar both helped to shore up the Canadian Dollar during Friday’s European session.
However, as long as the global oil market remains under pressure thanks to the uncertainty surrounding the US presidential election, the upside potential of the Canadian Dollar is likely to remain limited.
New Zealand Dollar (NZD) Remains Positive amid Market Optimism
The New Zealand Dollar (NZD) held onto a positive footing on Friday, continuing to benefit from a more upbeat market mood as Biden moved closer to winning.
An uptick in the third quarter inflation expectations reading offered additional support to NZD exchange rates, pointing towards a stronger level of economic activity.
Unless market sentiment sours the New Zealand Dollar could maintain its positive bias in the near term.