US Dollar Stumbles on More Vaccine News

Australian Dollar (AUD) Gains Capped by Weaker Leading Index

The Australian Dollar (AUD) came under pressure as October’s Westpac leading index failed to pick up on the month.

Instead the index weakened from 0.2% to 0.1%, suggesting that economic momentum within the Australian economy faded at the start of the fourth quarter. However, the downside potential of AUD exchange rates eased overnight thanks to Pfizer’s report of 95% effectiveness in the final results of its Covid-19 trial.

However, with signs pointing towards a jump in the latest Australian unemployment rate, the mood towards the ‘Aussie’ could easily sour this morning.

Pound (GBP) Gains as UK Inflation Strengthens

The Pound (GBP) found fresh traction against its rivals thanks to a better-than-expected UK consumer price index report.

As the headline inflation rate strengthened from 0.5% to 0.7% on the year, this offered GBP exchange rates another rallying point. While inflation remains some way short of the Bank of England’s (BoE) 2% target, the improvement still offered policymakers cause for confidence, limiting the odds of any future move into negative interest rates.

With forecasts pointing towards another monthly decline in November’s CBI industrial trends orders index, however, the Pound may fall out of favour once again as GBP investors await Brexit news.

Euro (EUR) Muted on Negative Eurozone Inflation

The Euro (EUR) remained on the back foot after October’s finalised Eurozone inflation rate confirmed a negative reading, with inflation at -0.3%.

A general improvement in market risk sentiment, driven by the latest vaccine developments, also put pressure on EUR exchange rates as the appeal of higher-yielding assets improved.

Looking ahead, another monthly decline in Eurozone construction output could leave the Euro trending lower across the board.

US Dollar (USD) Slips on Covid-19 Vaccine News

The US Dollar (USD) was unable to capitalise on a solid monthly increase in housing starts as safe-haven demand was limited following more vaccine news.

As the final results of the late-phase Pfizer vaccine trial saw an even higher rate of effectiveness than its initial report, the mood of markets improved drastically. This limited the US Dollar’s ability to hold its ground, with a rise in risk appetite leaving USD exchange rates under pressure once again.

If the Philadelphia Fed manufacturing index weakens on the month as expected, USD exchange rates may remain biased to the downside in the near term.

Canadian Dollar (CAD) Trends Lower Despite Inflation Uptick

The Canadian Dollar (CAD) saw little improvement even as the Canadian inflation rate bettered expectations overnight.

Although the headline inflation rate picked up from 0.5% to 0.7% on the year in October, this failed to shore up CAD exchange rates. Even a return to positive monthly inflation fell short of encouraging Canadian Dollar demand, with investors still anxious over the economic outlook.

However, a stronger showing from the ADP employment change report may still help to put a floor under CAD exchange rates tonight.

New Zealand Dollar (NZD) Bolstered by Risk Appetite

The New Zealand Dollar (NZD) gained support on the back of the general improvement in market sentiment overnight.

With the Pfizer vaccine proving more effective than initially thought, at least in its late-stage trial, investors were given fresh cause for confidence. This limited the impact of a disappointing producer price index output reading, keeping NZD exchange rates on a stronger footing.

Even so, any souring in market sentiment could see the ‘Kiwi’ coming under renewed pressure ahead of the weekend.

Data Releases

11:30 AUD Unemployment Rate (Oct) 7.2%
21:00 EUR Eurozone Construction Output (Sep) -3.8%
22:00 GBP CBI Industrial Trends Orders (Nov) -39
00:30 CAD ADP Employment Change (Oct) -200,000
00:30 USD Philadelphia Fed Manufacturing Index (Nov) 22

Louisa Heath