Australian Dollar Under Pressure from Construction Sector Decline

Australian Dollar (AUD) Softens as Construction Sector Weakens

The Australian Dollar (AUD) weakened in the wake of a sharper-than-expected contraction in the third quarter construction work done figures.

Evidence of fresh weakness within the Australian construction sector left AUD exchange rates vulnerable to selling pressure as confidence in the wider economic outlook diminished. With the previous day’s bout of market risk appetite fading, the Australian Dollar trended lower.

A quarterly decline in private capital expenditure may fuel additional anxiety over the prospect of a continued slowdown in Australian growth, leaving the ‘Aussie’ on the back foot through today’s session.

Pound (GBP) Limited as OBR Forecasts Sharp 2020 Growth Contraction

The Pound (GBP) remained largely out of favour with investors as the Office for Budget Responsibility (OBR) unveiled its latest economic and fiscal forecasts.

As the OBR expects to see the UK economy contract by -11.3% in 2020, this pushed the Pound lower across the board. Although the OBR also forecast a solid 5.5% rebound for the economy next year, this failed to outweigh fresh anxiety over 2020’s sharp slowdown and the prospect of an extended bout of economic weakness.

Looking ahead, a lack of news over progress in Brexit negotiations could limit the upside potential in GBP exchange rates as uncertainty creeps in again.

Euro (EUR) Lacks Direction ahead of ECB Meeting Minutes

The Euro (EUR) found some limited traction overnight, in large part thanks to the general easing in market risk appetite.

With no major Eurozone data releases on the calendar, the single currency struggled to find any particular direction against its rivals. However, with the impact of a dovish set of European Central Bank (ECB) meeting minutes already largely priced into EUR exchange rates, this helped to limit their downside potential.

Even so, the Euro may struggle to find any particular gains in the wake of the release of the minutes tonight.

US Dollar (USD) Weakens as Initial Jobless Claims Rise Again

The US Dollar (USD) failed to capitalise on better-than-expected monthly growth in durable goods orders last night.

Although orders experienced growth of 1.3% on the month, defying forecasts of a 0.9% reading, this was not enough to overshadow a disappointing set of jobless claims data. As initial jobless claims increased for a second consecutive week, this fuelled anxiety over the state of the US labour market, especially with the fact that any further stimulus measures are unlikely to materialise for months.

With US markets closed for Thanksgiving the US Dollar looks set to remain vulnerable to any shifts in general market sentiment in the days ahead.

Canadian Dollar (CAD) Struggles to Follow Oil Price Rally

The Canadian Dollar (CAD) saw limited demand even as oil prices rose to their highest level since early March.

While oil prices have experienced a solid run of gains, CAD exchange rates failed to sustain a bullish trend in spite of the currency’s commodity-correlated nature. Even with markets buoyed by the prospect of a Covid-19 vaccine rollout and the US presidential transition, the mood towards the Canadian Dollar remained muted.

Without the support of a fresh surge of market risk appetite, CAD exchange rates are likely to remain on the back foot.

New Zealand Dollar (NZD) Pushes Higher on Proposed Change to RBNZ Remit

The New Zealand Dollar (NZD) continued to make solid gains across the board as markets digested the proposed changes to the Reserve Bank of New Zealand’s (RBNZ) remit.

With the government reportedly keen to add housing prices into the central bank’s remit, the prospect of the RBNZ tightening interest rates in the months ahead picked up. While the change is still only a proposal, this was not enough to stop the ‘Kiwi’ strengthening notably in response to the news.

However, with forecasts pointing towards a widening of the New Zealand trade deficit in October, NZD exchange rates could struggle to hold onto their positive momentum this morning.

Data Releases

08:45 NZD Balance of Trade (Oct) NZ$-2.7 billion
11:30 AUD Private Capital Expenditure (Q3) -1.5%
18:00 EUR GfK Consumer Confidence Index (Dec) -5
20:00 GBP CAR Production (Oct) -8.2%
23:30 EUR European Central Bank Meeting Minutes

Louisa Heath