Australian Dollar Slumps as RBA Signals Potential Action

Australian Dollar (AUD) Slips as RBA Open to Further Action

The Australian Dollar (AUD) slumped across the board as the Reserve Bank of Australia (RBA) left the door open to future monetary stimulus measures.

While the minutes indicated that policymakers have no intention of taking interest rates into negative territory, this did little to limit their impact on the ‘Aussie’. With market risk appetite fading there appeared little reason to favour the Australian Dollar, especially after the country saw an increase in Covid-19 cases.

Even so, if October’s Westpac leading index reading shows an improvement on the month, this could shore up AUD exchange rates as hopes of a stronger economic outlook grow.

Pound (GBP) Benefits from Renewed Brexit Deal Hopes

The Pound (GBP) recovered ground against its rivals as speculation over a potential UK-EU trade deal continued.

Positive signals from officials encouraged hopes that the two sides could still reach an agreement in spite of the looming deadline for a draft deal. Reports that UK negotiator David Frost has indicated that a deal could come by next week gave the Pound a solid boost, although some market doubts over the potential for a deal remained.

Demand for the Pound could pick up further this evening as long as October’s headline UK inflation rate picks up from 0.5% to 0.6% on the year as forecast.

Euro (EUR) Bolstered by Widened Italian Trade Surplus

The Euro (EUR) found some renewed support as the Italian trade balance saw a surprise improvement in September, widening from €3.9 billion to €5.8 billion at the end of the third quarter.

Even so, investors remain wary of the possibility of the Eurozone economy experiencing a double-dip recession before the end of the year as coronavirus cases remain high throughout Europe.

Confirmation that the headline Eurozone inflation rate dipped to -0.3% in October could see EUR exchange rates remain on a weaker footing.

US Dollar (USD) Shakes Off Weaker Retail Sales Growth

The US Dollar (USD) held its ground last night in spite of a weaker-than-expected October retail sales figure.

While sales only saw growth of 0.3% on the month, this was not enough to knock USD exchange rates off a general uptrend during Tuesday’s European session.

Nevertheless, the US Dollar remains vulnerable to any fresh resurgence in market risk appetite as speculation over the global growth outlook continues.

Canadian Dollar (CAD) Softens as Oil Prices Sour

The Canadian Dollar (CAD) shed ground as global oil prices returned to the red once more, falling in the face of reduced market confidence.

Although investors remain hopeful of the possibility of OPEC and its allies reducing their oil output further in 2021, this was not enough to keep CAD exchange rates from stumbling. With countries around the world continuing to tighten Covid-19 restrictions, confidence in the global outlook remained limited, to the detriment of risk-sensitive currencies.

Any softening in the Canadian inflation rate for October could see CAD exchange rates trending lower tonight, with investors still wary of potential Bank of Canada (BoC) policy action.

New Zealand Dollar (NZD) Loses Traction Ahead of PPI Figures

The New Zealand Dollar (NZD) gained little in the way of traction as Monday’s bout of risk appetite faded.

With the initial reaction to Moderna’s Covid-19 vaccine announcement diminishing NZD exchange rates returned to the back foot. In the absence of any fresh domestic data support for the ‘Kiwi’ proved limited as investors instead favoured safe-haven assets once again.

However, a return to positive territory for the third quarter producer price index figures could help to support the New Zealand Dollar this morning.

Data Releases

08:45 NZD Producer Price Index Input (3Q) 0.3%
11:30 AUD Westpac Leading Index (Oct)
18:00 GBP Consumer Price Index (Oct) 0.6%
21:00 EUR Eurozone Consumer Price Index (Oct F) -0.3%
00:30 CAD Consumer Price Index (Oct) 0.4%

Louisa Heath