Australian Dollar (AUD) Lifted by Covid-19 Vaccine Optimism
The Australian Dollar (AUD) shook off the impact of the Reserve Bank of Australia’s (RBA) latest bulletin thanks to another bout of market optimism.
With investors increasingly hopeful that the successful rollout of a Covid-19 vaccine is on the horizon, the appeal of the risk-sensitive Australian Dollar improved. An end to the ongoing pandemic crisis would enable global growth to recover more rapidly, increasing demand for metals, like iron ore, which remain key Australian exports and would in turn shore up Australia’s economy.
As long as market sentiment remains positive, this should keep the Australian Dollar on a solid footing against its rivals today.
Pound (GBP) Slumps on Lack of Brexit Talks Breakthrough
The Pound (GBP) fell sharply out of favour after the Brussels meeting between Boris Johnson and Ursula von der Leyen failed to deliver a Brexit breakthrough.
This lack of resolution to the Brexit issue left GBP exchange rates on the back foot, even though the two agreed to extend discussions until Sunday. As markets had largely banked on a breakthrough, the Pound experienced significant selling pressure, especially after October’s monthly UK GDP confirmed a sharp loss of growth momentum.
Growing anxiety over the risk of a no-deal Brexit outcome may well keep the Pound biased to the downside in the near term.
Euro (EUR) Rallies as Dovish ECB Fails to Convince Markets
The Euro (EUR) pushed higher against many of the majors overnight in spite of the dovish nature of the latest European Central Bank (ECB) policy commentary.
While the central bank warned that inflation remains ‘disappointingly low’ and indicated that it continues to closely monitor developments in EUR exchange rates, this failed to convince investors. As a result, the Euro made solid gains in the wake of the policy meeting, with the impact of its expansion of monetary stimulus already long since priced into the single currency.
Confirmation that the German inflation rate remained in negative territory in November could still put something of a dampener on the Euro this evening, however.
US Dollar (USD) Sinks Despite Steady Inflation Rate
The US Dollar (USD) struggled to capitalise on an unexpectedly steady inflation rate reading last night.
Even though the headline inflation rate held steady at 1.2% on the year, this was not enough to offer USD exchange rates any particular rallying point. Investors were instead disappointed by the higher-than-expected uptick in the initial jobless claims figure, which points towards a sustained deterioration in the health of the US labour market.
With the Michigan consumer confidence index looking set to show a slight dip in December, the US Dollar could face further selling pressure heading into the weekend.
Canadian Dollar (CAD) Gains amid Risk-On Mood
The Canadian Dollar (CAD) made solid gains during yesterday’s session as risk-on trade and oil prices hitting their highest levels since March buoyed the commodity-linked ‘Loonie’.
Meanwhile, the Bank of Canada’s (BoC) decision to leave monetary policy unchanged at its December meeting capped some of the Canadian Dollar’s gains. The BoC indicated that it is likely to keep interest rates at their current level until existing economic slack is absorbed, something which its projections do not see happening until 2023.
The mood towards the Canadian Dollar could see an improvement this evening, though, if the third quarter capacity utilisation reading shows as strong an increase as forecast.
New Zealand Dollar (NZD) Strengthens Despite Card Spending Slowdown
The New Zealand Dollar (NZD) climbed on the back of upbeat market trade despite November’s electronic retail card spending figures showing a marked slowdown.
Spending growth slowed from 8.8% to just 0.1% on the month, undermining confidence in the health of the New Zealand economy. With consumers showing an increasing sense of wariness in the final months of the year, fears of a domestic slowdown picked up, but failed to weigh on NZD yesterday.
Any deterioration in the Business NZ PMI for November could put additional pressure on NZD exchange rates this morning.