Australian Dollar (AUD) Lifted by Strong Third Quarter GDP Performance
The Australian Dollar (AUD) picked up support as the third GDP bettered forecasts yesterday.
As growth rebounded 3.3% on the quarter, as opposed to the forecast 2.6%, this encouraged hopes of greater resilience within the Australian economy. Although doubts over the health of the fourth quarter GDP remain, AUD exchange rates rallied strongly in response to the report.
Further ‘Aussie’ gains could be in store this morning as long as October’s trade balance shows a widened surplus.
Pound (GBP) Sours as Brexit Anxiety Mounts
The Pound (GBP) fell sharply across the board in the wake of comments from EU chief Brexit negotiator Michel Barnier.
Barnier’s comments that UK-EU trade talks hang in the balance, leaving the door open for a potential no-deal scenario, weighed heavily on the Pound last night. With the two sides still failing to make any progress on some key issues, fears of a no-deal Brexit left investors with little reason to buy into the Pound.
GBP exchange rates look set to remain on a weaker footing if the finalised UK services PMI for November confirms a major contraction in sector activity.
Euro (EUR) Bolstered by Rebound in German Retail Sales
The Euro (EUR) benefitted from a stronger monthly rebound in German retail sales growth for October during Wednesday’s European session.
As sales rose 2.6% on the month, this helped to limit the impact of September’s sharp decline in retail sector activity. This suggests that the German economy got off to a stronger start in the fourth quarter than previously anticipated, helping to buoy the single currency against its rivals.
Evidence of a similar improvement in the latest Eurozone retail sales figures could keep the Euro trending higher against many of the majors.
US Dollar (USD) Makes Gains despite Disappointing Job Creation
The US Dollar (USD) ticked broadly higher despite a disappointing ADP employment change reading last night as the risk-on mood in markets paused, limiting safe-haven demand.
The US Dollar came under some pressure as the report showed that only 307,000 new private sector jobs had been created in November, falling from the 365,000 seen in October. As forecasts had pointed towards a much higher level of job creation, this added to bets that the labour market has continued to cool in the fourth quarter.
Another higher-than-expected week of initial jobless claims could see USD exchange rates weaken this evening.
Canadian Dollar (CAD) Limited by Record Drop in Labour Productivity
The Canadian Dollar (CAD) saw limited appeal as third quarter labour productivity unexpectedly slumped.
Rather than showing another modest quarterly increase as anticipated, productivity instead plunged -10.3%, a record decline. This contraction did not paint an encouraging picture of the economic outlook, reversing much of the productivity gains seen in the second quarter and putting pressure on CAD exchange rates.
Growing anticipation ahead of Friday’s set of Canadian labour market data may keep the Canadian Dollar on a softer footing in the near term.
New Zealand Dollar (NZD) Dented as Terms of Trade Show Sharp Decline
The New Zealand Dollar (NZD) weakened thanks to a deeper decline in the third quarter terms of trade index.
While forecasts had pointed towards trade conditions souring in the third quarter, suggesting a -3.5% decline in export prices, the deterioration far outpaced expectations. With export prices falling -8.3% on the quarter, worries increased over the trade outlook and the health of the New Zealand economy, denting the ‘Kiwi’.
A softer month of growth in building permits for October could also put some pressure on NZD exchange rates this morning.
Data Releases
08:45 NZD Building Permits (Oct) 1.2%
11:30 AUD Balance of Trade (Oct) A$5.8 billion
20:30 GBP Services PMI (Nov F) 45.8
21:00 EUR Eurozone Retail Sales (Oct) 0.8%
00:30 USD Initial Jobless Claims (28/Nov) 775,000