Australian Dollar (AUD) Trends Higher Thanks to Unemployment Rate Improvement
The Australian Dollar (AUD) made gains across the board thanks to a surprise improvement in November’s labour market data.
As the headline unemployment rate saw an unexpected dip from 7% to 6.8%, investors’ confidence grew on the outlook of the labour market, suggesting that conditions improved in the fourth quarter. Coupled with the general sense of market risk appetite fuelled by hopes of a US fiscal stimulus package and UK-EU trade deal, this lifted the Australian Dollar higher.
This sense of market optimism could keep the ‘Aussie’ biased to the upside heading into the weekend, as long as hopes remain high.
Pound (GBP) Holds onto Brexit Deal Optimism
The Pound (GBP) held onto its generally positive footing in spite of comments from Boris Johnson which appeared less optimistic on the odds of a UK-EU trade deal, warning that an exit on World Trade Organisation (WTO) terms remains the more likely outcome, slightly dampening optimism.
On the other hand, EU officials maintained a more positive outlook, helping to limit the downside potential of the Pound. Meanwhile, a lack of action from the Bank of England (BoE) did little to weigh down GBP exchange rates.
With forecasts pointing towards a sharp monthly decline in UK retail sales for November, reflecting the impact of the second national lockdown, the mood towards the Pound may sour today.
Euro (EUR) Appeal Limited as Eurozone Inflation Remains Negative
The Euro (EUR) struggled to find a direction against its rivals after confirmation that the Eurozone inflation rate remained negative in November.
With inflation still trailing far below the European Central Bank’s (ECB) 2% target, the case for greater monetary policy loosening appeared to pick up further. As markets also adopted a more risk-positive outlook, this further diminished the appeal of the single currency last night.
A softening of the German IFO business climate index could see the Euro shedding further ground against its rivals.
US Dollar (USD) Extends Losses as Initial Jobless Claims Hit Three-Month High
The US Dollar (USD) experienced a fresh decline overnight thanks to a bigger-than-expected jump in the latest initial jobless claims figure, which came in at 885,000, much higher than the 800,000 forecast, leaving USD exchange rates on the back foot.
This lifted initial jobless claims to their highest level in three months, highlighting the pressure that continues to weigh on the US economy and labour market. With Covid-19 cases still rising, the prospect for further job losses appears high, limiting the appeal of the US Dollar.
USD exchange rates could extend their downtrend further if US Congress reaches an agreement on a fiscal stimulus deal before the Christmas break, as the continued upbeat mood would weigh on the safe-haven ‘Greenback’.
Canadian Dollar (CAD) Dented by Revised ADP Employment Change Reading
The Canadian Dollar (CAD) failed to benefit from an unexpectedly positive November ADP employment change figure.
Although last month saw 40,800 jobs created by private businesses, this paled in comparison to the downward revision of October’s figure. With the data now showing that a massive 383,500 jobs were lost at the start of the fourth quarter, the mood towards the Canadian Dollar soured, even in the face of general market positivity.
With markets expecting to see Canadian retail sales growth slow to just 0.2% on the month in October, the appeal of the Canadian Dollar may remain limited heading into the weekend.
New Zealand Dollar (NZD) Bolstered by Third Quarter Growth Rebound
The New Zealand Dollar (NZD) rallied solidly on the back of a better-than-expected third quarter GDP report.
As growth rebounded 14% on the quarter, bettering expectations of a 13.5% uptick, this gave investors fresh incentive to pile into the ‘Kiwi’ yesterday. With markets in a widely optimistic mood, the appeal of the risk-sensitive New Zealand Dollar generally improved, giving NZD exchange rates a solid boost.
However, a widened trade deficit for November could see the ‘Kiwi’ reversing its gains over the course of the day.
Data Releases
08:45 NZD Balance of Trade (Nov) NZ$-620 million
18:00 GBP Retail Sales (Nov) -4.2%
20:00 EUR Germany IFO Business Climate Index (Dec) 90
00:30 CAD Retail Sales (Oct) 0.2%
02:00 USD CB Leading Index (Nov) 0.5%