Australian Dollar (AUD) Support Limited amid Fading Risk Appetite
The Australian Dollar (AUD) saw little in the way of support yesterday as market sentiment generally soured, with the confidence stoked by the Pfizer vaccine news having largely run its course.
Meanwhile, lingering doubts over the outlook of the global economy in the fourth quarter added to the bearish mood leaving the ‘Aussie’ struggling to find traction against its rivals.
An easing in November’s consumer inflation expectations reading could drag AUD exchange rates lower today, with weaker inflation giving the Reserve Bank of Australia (RBA) greater cause for dovishness.
Pound (GBP) Weakness Continues as UK GDP Fails to Impress
The Pound (GBP) extended its decline in the wake of the latest UK GDP report as September’s monthly growth rate proved weaker than anticipated, dipping from 2.2% to 1.1%, encouraging bets the UK economy is on track for a fresh contraction in the fourth quarter.
With the second national lockdown looking set to drag on growth in the final months of the year, investors failed to take encouragement from the record growth seen in the overall third quarter GDP.
Growing doubts over the UK and EU’s ability to reach an agreement on Brexit before the upcoming draft deal deadline could keep the Pound on the back foot in the days ahead.
Euro (EUR) Gains Ground in Spite of Weaker Industrial Production
The Euro (EUR) pushed higher against many of its rivals during Thursday’s European session even as Eurozone industrial production fell short of forecast.
Support for the single currency picked back up despite September’s industrial production report showing a surprise -0.4% contraction on the month. Although this weakness added to bets that the Eurozone faces a potential double-dip recession, EUR exchange rates pushed higher in the face of reduced market risk appetite.
However, any negative revision to the second estimate of the third quarter Eurozone GDP may see the single currency fall back out of favour.
US Dollar (USD) Shakes off Underwhelming Inflation Data
The US Dollar (USD) held onto a generally positive footing overnight in spite of a weaker-than-expected US inflation reading as the headline inflation rate eased from 1.4% to 1.2%, given the already dovish bias of the Federal Reserve.
On the other hand, as the latest initial and continuing jobless claims saw a stronger improvement than anticipated, this helped to shore up the US Dollar.
The US Dollar could continue making gains if more cautious trade continues and safe-haven demand picks up amid US political uncertainty.
Canadian Dollar (CAD) Unable to Hold onto Oil Price Rally
The Canadian Dollar (CAD) saw limited support even as the week’s oil market rally continued in earnest.
Although any significant recovery in global oil demand appears unlikely to materialise until early 2021 at the earliest, this was not enough to prevent prices pushing higher overnight. However, the Canadian Dollar struggled to capitalise on the continued bullishness in spite of its nature as a commodity-correlated currency.
Comments from Bank of Canada (BOC) policymaker Wilkins could put further pressure on CAD exchange rates ahead of the weekend.
New Zealand Dollar (NZD) Support Fades ahead of Manufacturing PMI
The New Zealand Dollar (NZD) failed to hold onto its initial bout of gains as the impact of the Reserve Bank of New Zealand (RBNZ) meeting faded.
As markets have now largely priced in the prospect of greater RBNZ optimism into the New Zealand Dollar, this left investors with limited incentive to continue favouring the ‘Kiwi’. Meanwhile, a lack of market risk appetite also put a dampener on NZD exchange rates in the face of the recovering US Dollar.
With forecasts pointing towards the manufacturing PMI falling into contraction territory in October, the appeal of the New Zealand Dollar could weaken further.
08:30 NZD Business NZ PMI (Oct) 46.6
11:00 AUD Consumer Inflation Expectations (Nov) 3.2%
21:00 EUR Eurozone Gross Domestic Product (Q3) 12.7%
02:00 USD Michigan Consumer Sentiment Index (Nov) 82