New Zealand Dollar Jumps on RBNZ Optimism

Australian Dollar (AUD) Steady on Covid-19 Vaccine Confidence

The Australian Dollar (AUD) held onto a generally positive footing as optimism over the prospect of a Covid-19 vaccine remained.

Lingering confidence in the apparent light at the end of the current pandemic tunnel limited the downside potential of AUD exchange rates. However, in the absence of fresh Australian data the ‘Aussie’ struggled to find any fresh footholds against the majors.

With forecasts pointing towards a softening of November’s consumer inflation expectations, the Australian Dollar could face renewed selling pressure this morning.

Pound (GBP) Limited by Brexit Concerns

The Pound (GBP) remained largely out of favour as worries over Brexit picked up again following reports that the draft Brexit deal faces a deadline of 19th November, in order to be ready for an EU leaders’ conference.

As the possibility of a no-deal scenario still appears on the table, given ongoing disagreement over issues such as fishing rights, the mood towards the Pound remained muted.

Demand for the Pound could pick up sharply this evening, however, as forecasts point towards a solid bounce in the third quarter UK GDP reading.

Euro (EUR) Under Pressure as ECB Maintains Cautious Economic Outlook

The Euro (EUR) came under pressure on Wednesday thanks to the recovery of the US Dollar and fresh commentary from European Central Bank (ECB) policymakers.

The single currency failed to take encouragement from ECB President Christine Lagarde’s latest comments on the economic outlook, which indicated that the Eurozone still faces a ‘stop-and-start’ recovery. As Lagarde all-but confirmed that the ECB will take further policy action at its December meeting, investors saw little reason to buy into the Euro.

If Eurozone industrial production shows signs of holding up on the month in September, this could give EUR exchange rates a rallying point.

US Dollar (USD) Recovers Ground Ahead of Inflation Data

The US Dollar (USD) clawed back some of the week’s losses as markets factored in the amount of time it could still take for Pfizer’s Covid-19 vaccine to clear testing.

With market risk appetite easing, the US Dollar pushed higher against many of the majors overnight. While the drama surrounding the US presidential election does not appear over, further limiting the likelihood of an imminent breakthrough on fiscal stimulus measures, this was not enough to dampen the mood towards the US Dollar.

However, tonight’s US inflation rate could see USD exchange rates shedding ground once again if it dips as forecast.

Canadian Dollar (CAD) Gains Limited in spite of Oil Market Strength

The Canadian Dollar (CAD) failed to hold onto a bullish trend even as the global oil market extended its recovery last night.

Oil prices continued to push higher as markets bet on the prospect of global demand picking up sharply in the first half of 2021, driven by Covid-19 vaccine hopes. However, CAD exchange rates struggled to capitalise on this positive trend, experiencing technical resistance after the major gains staged earlier in the week.

If US crude oil stockpiles continue to show a drawdown tonight, this could help to limit the losses of the Canadian Dollar.

New Zealand Dollar (NZD) Rallies Sharply on RBNZ Optimism

The New Zealand Dollar (NZD) rallied sharply in the wake of the Reserve Bank of New Zealand’s (RBNZ) policy meeting as Governor Adrian Orr adopted a positive tone, noting that economic activity had proved more resilient than anticipated since August.

This encouraged bets that the central bank may not cut interest rates in the months ahead, boosting NZD exchange rates higher across the board.

Even so, the New Zealand Dollar may struggle to hold onto its gains for long if market risk appetite sours further today.

Data Releases

11:00 AUD Consumer Inflation Expectations (Nov) 3.2%
18:00 GBP Gross Domestic Product (Q3) 15.8%
21:00 EUR Eurozone Industrial Production (Sep) 0.7%
00:30 USD Inflation Rate (Oct) 1.3%

Louisa Heath