Australian Dollar (AUD) Benefits from Risk-On Mood
The risk-sensitive Australian Dollar (AUD) rose yesterday amid a risk-on market mood fuelled by positive US-China economic talks.
Rising commodity prices also bolstered the ‘Aussie’ as iron ore prices rose in China. As commodity-linked currency and proxy to the Chinese economy, AUD benefitted.
Australian inflation rate data released this morning will drive movement in AUD. Despite the Reserve Bank of Australia (RBA) reiterating its policy stance of likely holding rates until 2024, investors may again reprice expectations, with the third quarter rate expected to slow to 3.1%.
Pound (GBP) Trends Higher as CBI Data Exceeds Forecasts
The Pound firmed on Tuesday following an uneven start to the session, as CBI distributive trades data printed higher than expectations.
The data was expected to report a sales balance of +13, but instead rose to 30 for October. The higher-than-expected figure is likely due to an acceleration in retail sales and order growth rates compared with last year, when both declined amid rising Covid-19 cases.
Pound dynamics today may ride on the UK’s autumn Budget release, which is expected to reveal a public sector pay rise, alongside investment in education and the NHS.
Euro (EUR) Trades Lower as German Economy Faces Headwinds
The Euro (EUR) struggled yesterday on a lack of significant data. Instead, EUR found direction on external factors.
Comments from Germany’s Economy Minister Peter Altmaier revealed that the German government will cut its 2021 GDP forecast to 2.6%, as the economy comes under pressure from supply chain constraints.
Alongside a warning from Germany’s Bundesbank on Monday, the news is weighing on the Euro. Further trading is likely to be influenced by risk sentiment and US Dollar (USD) dynamics on Wednesday.
US Dollar (USD) Subdued by Risk-On Mood
The US Dollar fell on Tuesday as increased risk-appetite sapped demand for the safe-haven ‘Greenback’, with constructive talks between the US and China supporting risk-on trade.
A modest decline in Treasury yields exacerbated downside, though hopes of a more aggressive monetary policy response from the Federal Reserve capped losses. US inflation remains stubbornly high, feeding expectations for the central bank to taper its bond-buying programme.
Looking ahead, the US Dollar may be dented by durable goods order data this evening, which are expected to have contracted -1.1% in September
Canadian Dollar (CAD) Wavers Ahead of Interest Rate Decision
The Canadian Dollar (CAD) traded down yesterday despite a modest uptick in the price of crude oil. Demand remains high as gas prices surge and consumers anticipate reduced supply.
Meanwhile, investors await the Bank of Canada’s (BoC) interest rate decision. While interest rates are forecast to remain unchanged until early 2022, BoC officials may strike a more hawkish tone given last week’s high inflation.
New Zealand Dollar (NZD) Trades Level Ahead of Data Release
The New Zealand Dollar (NZD) firmed through Tuesday ahead of today’s trade balance and business confidence releases. The ANZ’s final reading for October is expected to fall to -8.6.
Despite this, the ‘Kiwi’ still found considerable support on a risk-on mood.
Data Releases
Oct 27th 07:45 NZD Balance of Trade (Sep) N$-91m
Oct 27th 10:00 NZD ANZ Business Confidence Final (Oct) -8.6
Oct 27th 10:30 AUD Inflation Rate (Q3) 3.1%
Oct 27th 22:30 GBP Autumn Budget N/A
Oct 27th 22:30 USD Durable Goods Orders (Sep) -1.1%
Oct 28th 00:00 CAD BoC Interest Rate Decision 0.25%