Australian Dollar (AUD) Pressured by weak China data and strong USD
The Australian Dollar weakened against the US Dollar on Monday, with AUD/USD dropping 0.45% following disappointing Chinese trade data. The decline was driven by growing doubts about the effectiveness of China’s latest stimulus measures, coupled with a risk-off sentiment among traders. The strengthening US Dollar further added pressure to the pair.
Outlook remains mixed, with indicators pointing to both potential growth and challenges. The Reserve Bank of Australia (RBA) has taken a slightly dovish stance, though markets only expect a modest rate cut of 0.25% in 2024.
New Zealand dollar (NZD) Ongoing economic weakness despite modest spending growth
The New Zealand dollar is awaiting tomorrow’s Consumer Price Index (CPI) figures, with the market signaling that a slight increase in CPI quarter-on-quarter could potentially trigger some movement in the NZD.
Despite modest growth in spending, the broader economic picture remains weak. Card spending was flat in September, with both core and total spending rising just 0.3% month-on-month. For the third quarter, spending values declined for core (-0.5%) and retail (-0.7%), suggesting another likely drop in retail sales volumes.
The September Performance of Services Index (PSI) held steady at 45.7, indicating the seventh consecutive month of contraction and reflecting ongoing GDP weakness. Meanwhile, upcoming REINZ data for September is expected to show a slight increase in housing market activity, although house prices are likely to remain under pressure due to the rising number of new listings and inventory.
US dollar (USD) buoyed by market caution
The US dollar (USD) got off to a positive start this week as a risk-averse market mood saw investors favour the safe-haven currency.
These risk-off flows were fuelled by weak Chinese economic data and ongoing tensions in the Middle East.
Coming up, USD investors will look to speeches by Federal Reserve officials Mary Daly and Adriana Kugler for direction today. If they appear open to further rate cuts, the US dollar may weaken.
Pound (GBP) flat in quiet trade
The pound (GBP) traded sideways yesterday in the absence of any notable UK economic data.
GBP investors were also reluctant to alter their positions in the currency ahead of some high-impact releases coming later in the week.
Yesterdays session opened with the publication of the UK’s latest jobs report. August’s figures revealed unemployment remained flat while wage growth cooled. This may drag on the pound through today’s session as it’s likely to stoke Bank of England (BoE) interest rate cut bets.
Euro (EUR) subdued as ECB rate decision looms
The euro (EUR) was mostly muted on Monday, as EUR investors braced for the European Central Bank’s (ECB) impending interest rate decision.
Despite some economists suggesting there is a case for the ECB to leave its monetary policy untouched this month, most investors are expecting another 25bps rate cut.
Germany’s latest ZEW economic sentiment index is likely to act as the main catalyst for movement for the euro today. If the index shows that morale remains downbeat this month, the euro is likely to stumble.
Canadian dollar (CAD) muted as oil prices decline
The Canadian dollar (CAD) was subdued on Monday amid another softening of oil prices. Further losses were only avoided thanks to CAD’s positive correlation with the US dollar.
Canada will publish its latest consumer price index later this afternoon. September’s CPI figures are expected to report inflation crept higher last month. Will this ease Bank of Canada (BoC) rate cut bets and lift the ‘loonie’?
Data Releases
16:00 GBP Unemployment Rate (Aug)
16:00 GBP Wage Growth (Aug)
19:00 EUR German ZEW Economic Sentiment (Oct)
22:30 CAD Inflation Rate (Sep)
01:30 USD Fed Daly Speech
03:00 USD Fed Kugler Speech