Pound Recovers Ground Despite Looming Brexit Deadline

Australian Dollar (AUD) Under Pressure as Market Risk Sentiment Sours

The Australian Dollar (AUD) saw little in the way of support on Friday as the week’s market risk appetite petered out.

With Covid-19 infections continuing to rise sharply in Europe, the optimism over Pfizer’s potentially viable vaccine diminished. As the global economy looks set to remain under pressure for some months to come before the pandemic can be brought fully under control, the appeal of the risk-sensitive Australian Dollar weakened.

Signs of strength in the latest Chinese retail sales and industrial production figures may offer the ‘Aussie’ some support today due to AUD acting as a proxy for market sentiment towards China.

Pound (GBP) Gains in spite of Growing Brexit Anxiety

The Pound (GBP) pushed higher across the board ahead of the weekend, even as anxiety over UK-EU Brexit trade talks saw a resurgence.

While less than a week remains before the deadline for a draft Brexit deal, GBP exchange rates returned to a positive footing on Friday as the Pound benefited from weakness in its rivals.

As long as doubts over the possibility of the UK and EU reaching a deal this week persist, however, this could keep a lid on GBP exchange rates.

Euro (EUR) Weakens after Negative Revision to Eurozone GDP

The Euro (EUR) stumbled as the second estimate of the third quarter Eurozone gross domestic product was revised lower during Friday’s European session.

Although the revision only pushed the quarterly growth rate down from 12.7% to 12.6%, the single currency struggled as weaker signs of growth in the third heightened fears of an impending double-dip recession.

Meanwhile, fresh signs of dovishness among European Central Bank (ECB) policymakers may see EUR exchange rates shed ground this evening.

US Dollar (USD) Support Limited as Consumer Confidence Slips

The US Dollar (USD) lost its footing in the wake of a surprise decline in the Michigan consumer sentiment index for November as uncertainty over the US presidential election affected confidence in the economy.

Meanwhile, lower US treasury yields also weighed on US Dollar exchange rates, causing the ‘Greenback’ to weaken against many of its peers.

A stronger showing from the Empire State manufacturing index could see the US Dollar trending higher once again, although any shifts in risk appetite will likely be the main driver in USD exchange rates.

Canadian Dollar (CAD) Slides as Oil Prices Reverse Gains

The Canadian Dollar (CAD) stumbled as the oil market’s rally proved unable to sustain itself further during Friday’s European session.

Brent crude prices dropped -1.4% on the day’s opening level, indicating that a sense of anxiety had returned to the oil market. This limited support for the commodity-correlated Canadian Dollar, especially in the absence of any wider improvement in market risk appetite.

Even so, CAD exchange rates may find a rallying point this evening if September’s manufacturing sales rebound on the month as forecast.

New Zealand Dollar (NZD) Fails to Capitalise on Strong Manufacturing PMI

The New Zealand Dollar (NZD) saw limited gains even though October’s manufacturing PMI unexpectedly remained in expansion territory.

While the PMI bettered forecasts by clocking in at 51.7 rather than 46.6, pointing towards solid monthly activity in the sector, this was not enough to boost the ‘Kiwi’. An underwhelming food inflation figure and the general loss of market risk sentiment left the New Zealand Dollar lacking in traction.

If the corresponding services PMI also demonstrates solid growth, however, this may still offer NZD exchange rates a boost.

Data Releases

08:30 NZD Services PMI (Oct) 50.6
00:30 CAD Manufacturing Sales (Sep) 1.5%
00:30 USD Empire State Manufacturing Index (Nov) 13

Louisa Heath