Australian Dollar (AUD) Stumbles even as Chinese Manufacturing PMI Grows
The Australian Dollar (AUD) failed to benefit from an improved Chinese manufacturing PMI as the general sense of market risk appetite faded at the start of the week.
Although the manufacturing sector delivered a stronger-than-expected month of activity in November, this failed to shore up the Australian Dollar despite the Australian Dollar acting as a proxy to Chinese economic sentiment.
If the Reserve Bank of Australia (RBA) proves dovish at its policy announcement today, the mood towards the ‘Aussie’ looks set to sour further.
Pound (GBP) Supported by UK Vaccine Approval
The Pound (GBP) found some renewed support on Monday as UK authorities appear set to approve the Pfizer and BioNTech coronavirus vaccine.
At the same time, comments from UK Foreign Secretary Dominic Raab that progress should be made in UK-EU trade talks on fisheries this week helped Sterling recover some of Friday’s losses.
As long as November’s finalised manufacturing PMI remains firmly in expansion territory, the Pound could remain on a positive footing.
Euro (EUR) Trends Lower on Negative German Inflation
The Euro (EUR) softened in the wake of the German inflation rate falling deeper into negative territory in November.
As the headline German inflation rate disappointed forecasts to dip from -0.2% to -0.3% on the year, this gave investors fresh reason to bet on further European Central Bank (ECB) monetary loosening. With inflation trailing so far below the central bank’s 2% target, the case for greater policy action appeared to increase, to the detriment of the single currency.
An uptick in the German unemployment rate could drive EUR exchange rates lower across the board this evening.
US Dollar (USD) Lifted in spite of Softening Business Confidence
The US Dollar (USD) made some limited gains in spite of the underwhelming nature of the latest Chicago PMI.
While the PMI weakened from 61.1 to 58.2, pointing towards a deterioration in confidence among businesses, this was not enough to weigh down the US Dollar at this stage. With market risk appetite generally limited, USD exchange rates were able to find some traction thanks to renewed safe-haven demand.
As long as the ISM manufacturing PMI delivers a strong performance for November the US Dollar should remain on an uptrend against its rivals.
Canadian Dollar (CAD) Shored Up by Current Account Deficit
The Canadian Dollar (CAD) pushed higher as the third quarter current account deficit failed to widen as far as anticipated.
As the deficit only widened to C$-7.5 billion, rather than the forecast C$-9.1 billion, this helped to limit worries over the health of the economic outlook. This limited the negative impact of a sharp monthly decline in building permits, even though the Canadian construction sector appears increasingly under pressure.
A solid rebound in the third quarter gross domestic product may help to support CAD exchange rates further tonight.
New Zealand Dollar (NZD) Benefits from Improved Business Confidence Index
The New Zealand Dollar (NZD) saw limited downside pressure thanks to an unexpected improvement in November’s ANZ business confidence index.
As the index picked up from -15.7 to -6.9 on the month, this suggests that sentiment is moving in the right direction, encouraging hopes of a sustained improvement in the months ahead. Even so, with market risk appetite generally muted at the start of the week, this limited the potential for NZD exchange rate gains.
Without the support of improved market confidence, the ‘Kiwi’ may struggle to make any further headway in the near term.
Data Releases
14:30 AUD Reserve Bank of Australia Rate Decision 0.1%
19:55 EUR Germany Unemployment Rate (Nov) 6.3%
20:30 GBP Manufacturing PMI (NOV F) 55.2
00:30 CAD Gross Domestic Product (Q3) 10%
02:00 USD ISM Manufacturing PMI (Nov) 57.9