Australian Dollar (AUD) Strengthens on Lockdown Easing Optimism
The Australian Dollar (AUD) found support against the majority of its peers yesterday on reopening optimism as New South Wales and Victoria prepare to leave lockdown. Economists are optimistic, foreseeing pent-up demand for hospitality and retail.
‘Aussie’ gains came despite fears of an economic slowdown in China and worries over the Chinese property developer Evergrande’s debt crisis. As AUD acts as a proxy for the Chinese economy, news of negative economic news can weigh on the risk-sensitive currency.
Looking ahead, tomorrow’s interest rate decision from the Reserve Bank of Australia may inspire further AUD movement – if central bank officials strike a hawkish tone, the ‘Aussie’ will likely receive support.
Pound (GBP) Climbs as Fuel Crisis Abates
The Pound (GBP) also firmed through yesterday’s session despite ongoing fuel supply headwinds. Fuel shortages persist across London and the South East, where the military have been drafted in to oversee deliveries.
Nevertheless, comments from the Petrol Retailers Association seem to have reassured investors. Executive Director Gordon Balmer told news sources that the situation is slowly returning to normal in most parts of the country, with problems in Scotland, the North and the Midlands ‘virtually at an end’.
Today’s finalised services PMI may extend the Pound’s upside, if they print at or above expectations. The UK’s manufacturing PMI last week exceeded flash predictions, reaching 57.1, above the 56.3 expected.
Euro (EUR) Mixed as USD Weakens
The Euro (EUR) traded in a mixed range against its peers on Monday, as the single currency’s negative correlation with the US Dollar provided EUR with some support.
A dovish outlook from the European Central Bank (ECB) continues to extend downside pressure amidst growing inflationary concerns. A record run in energy prices drove inflation to a 13-year high last week, prompting concerns that price pressures are less transitory than initially thought.
New data throughout the week from Germany and the Eurozone is likely to inspire further movement in the Euro: today’s services PMIs are forecast to decline, while retail sales on Wednesday are set to improve.
US Dollar (USD) Falls amid Debt Ceiling Concerns
The US Dollar (USD) edged lower yesterday as the country risks defaulting on its debt so long as Democrats and Republicans remain divided over the best way to raise the debt ceiling.
A slight improvement in market risk appetite is also weighing on the safe-haven ‘Greenback’, amid more upbeat trade at the start of the month.
Looking ahead, today’s balance of trade and PMI figures may dent US Dollar sentiment further, if they print lower than the month previous.
Canadian Dollar (CAD) Firms on Rising Oil Prices
The Canadian Dollar (CAD) found renewed support through yesterday’s session as the Organization of the Petroleum Exporting Countries (OPEC) and its allies resolved to stick with its current output policy.
Members will continue to honour an existing agreement to release 400,000 barrels per day of oil in November, news of which boosted WTI prices as demand remains high.
Tomorrow’s balance of trade may inspire additional movement in the Canadian Dollar, as it is expected to reveal a smaller surplus than in July.
New Zealand Dollar (NZD) Wavers on Lack of Data
The New Zealand Dollar (NZD) fluctuated in a narrow range yesterday as a cautious market mood subdued trading sentiment, while Australian Dollar strength provided some support.
Ahead of Wednesday’s interest rate decision from the Reserve Bank of New Zealand, ‘Kiwi’ dynamics will continue to be influenced by risk sentiment and the movement of its peers.
Data Releases
Oct 5th 08:00 AUD Markit Services PMI Final (Sep) 44.9
Oct 5th 10:30 AUD Balance of Trade (Aug) A$10.3bn
Oct 5th 11:30 AUD Retail Sales Final (Aug) -1.7%
Oct 5th 13:30 AUD RBA Interest Rate Decision 0.1%
Oct 5th 17:55 EUR German Markit Services PMI Final (Sep) 55.3
Oct 5th 18:00 EUR Eurozone Markit Services PMI Final (Sep) 56.3
Oct 5th 18:30 GBP Markit/CIPS Services PMI Final (Sep) 54.6
Oct 5th 22:30 CAD Balance of Trade (Aug) C$0.43bn
Oct 5th 22:30 USD Balance of Trade (Aug) C$-70.5bn
Oct 5th 23:45 USD Markit Services PMI Final (Sep) 54.4
Oct 6th 01:00 EUR ECB President Lagarde Speech