Australian dollar (AUD) marches higher as inflation beats forecasts
The Australian dollar (AUD) strengthened yesterday after new data showed that Australian inflation accelerated more than expected.
Inflation in the third quarter came in at 3.2% – a sharp rise from the previous quarter’s 2.1% and above forecasts of 3% – significantly reducing the chances of another Reserve Bank of Australia (RBA) interest rate cut in the near future.
The pullback in rate cut bets could continue to underpin AUD today. Risk dynamics could also impact the ‘Aussie’, with an upbeat mood potentially supporting the currency.
New Zealand dollar (NZD) rises amid risk-on trade
The New Zealand dollar (NZD) also trended higher yesterday, with the risk-sensitive ‘kiwi’ enjoying the cheery market mood and its positive correlation with the ‘Aussie’.
Today, an expected improvement in New Zealand business confidence in October could see NZD gain further ground.
Pound (GBP) continues to fall amid budget fears
The pound (GBP) extended its recent selloff yesterday, with GBP/AUD hitting an eight-month low, as pressures continued to mount on Chancellor Rachel Reeves ahead of the UK autumn budget.
Sterling’s losses were compounded by bets that the challenges facing the British economy could encourage the Bank of England (BoE) to cut interest rates again before the end of the year.
These factors may continue to weigh on the pound during today’s session, as fresh UK economic data remains in short supply.
Euro (EUR) stumbles as risk appetite improves
The euro (EUR) wavered lower against many of its peers yesterday as a lack of data and a risk-on mood exposed the safer single currency to losses.
EUR also struggled to attract support ahead of today’s Eurozone GDP figures, which are forecast to show that growth remained at a near standstill in the third quarter.
If the GDP data today does show that the Eurozone economy has practically stalled, expect to see the euro soften. The European Central Bank (ECB) will also announce its latest rate decision today, which could infuse EUR with volatility.
US dollar (USD) falls ahead of Fed decision
The safe-haven US dollar (USD) fell against its stronger rivals yesterday as a buoyant mood swept markets, thereby dampening USD’s appeal.
The increase in risk appetite came amid easing US trade tensions, strong earnings reports from tech companies, and expectations of an interest rate cut from the Federal Reserve.
The Fed announced its latest rate cut earlier this morning, leading to some losses for USD. However, uncertainty over the pace of further cuts could limit the US dollar’s downside as the session progresses.
Canadian dollar (CAD) firms as BoC indicates rates may be neutral
The Canadian dollar (CAD) rallied yesterday, despite an expected 25-basis-point rate cut from the Bank of Canada (BoC), as the central bank indicated that it may be done cutting rates.
Tailwinds following the BoC decision may continue to support CAD today. Elsewhere, oil price dynamics may influence the commodity-linked currency.
Data releases
10:00 NZD ANZ Business Confidence (Oct)
20:00 EUR GDP Growth Rate (Q3)
23:15 EUR ECB Interest Rate Decision