Australian dollar (AUD) weakens as sentiment sours
The Australian dollar (AUD) fell yesterday as a risk-off mood swept markets and the Reserve Bank of Australia’s (RBA) interest rate decision failed to provide support.
Although the RBA held rates steady, as expected, the bank struck a slightly more uncertain tone around the need for future rate cuts than investors anticipated.
If sentiment remains downbeat today, the ‘Aussie’ could struggle to garner attention. Another negative reading in the Ai industry index, published earlier this morning, could also pressure AUD.
New Zealand dollar (NZD) slides in risk-off trade
The New Zealand dollar (NZD) also faced headwinds yesterday amid the gloomy mood. Fears of a market correction and concerns of elevated global borrowing costs both contributed to widespread risk aversion.
NZD may come under pressure again today, after New Zealand’s latest jobs data showed a rise in unemployment in the third quarter.
Pound (GBP) dented by pre-budget speech
The pound (GBP) tumbled against its stronger rivals yesterday, after Chancellor Rachel Reeves used a pre-budget speech to pave the way for coming tax rises.
Tighter fiscal policy could hamper UK economic growth and potentially prompt the Bank of England (BoE) to pursue looser monetary policy, with both these factors weighing on Sterling.
The UK’s final services PMI may have little impact on GBP today, unless it deviates from the preliminary estimate. Therefore budget and BoE speculation could continue to determine the pound’s direction.
Euro (EUR) buoyed amid cautious mood
The euro (EUR) firmed on Tuesday as the safer single currency benefitted from the risk-off mood gripping markets.
However, EUR found its upside limited by a lack of Eurozone data and the currency’s negative correlation with a rising US dollar (USD).
Germany’s latest factory orders data is due out today. A forecast 1% rebound in orders in September could support the single currency.
US dollar (USD) hits multi-month highs amid risk aversion
The US dollar was the clear winner during yesterday’s session, with the safe-haven ‘greenback’ striking multi-month highs against many of its rivals thanks to the anxious market mood.
In addition, elevated US government bond yields – which surged following the Federal Reserve’s policy decision last week – also lent USD strength.
Turning to today, the US ADP employment change figure for October is the focus. With the more influential non-farm payrolls report delayed due to the government shutdown, the ADP data could dent USD, if it shows weak jobs growth last month.
Canadian dollar (CAD) firms in tandem with USD
The crude-linked Canadian dollar (CAD) shrugged off a drop in oil prices yesterday and rose against many of its peers, thanks to CAD’s positive correlation with USD.
Oil price dynamics and USD movement are likely to continue driving CAD exchange rates today. Could persistent US dollar strength underpin the ‘loonie’ once again?
Data releases
07:45 NZD Unemployment Rate (Q3)
08:00 AUD Ai Group Industry Index (Oct)
10:00 NZD RBNZ Press Conference
17:00 EUR German Factory Orders (Sep)
19:30 GBP Services PMI (Oct)
23:15 USD ADP Employment Change (Oct)