Australian Dollar
An improved outlook for Australian coal and iron ore exports boosted the Australian Dollar on Friday after the government revised its commodity price forecasts higher. The latest figures from the Department of Industry, Innovation and Science upped their forecasts for iron ore by 10% and for coal by 16%, citing strong demand from steelmakers in China driven by an uptick in the construction sector. The day’s data also performed well, with the AiG performance of construction index for September leaping back into growth territory thanks to a rise from 46.6 to 51.4. The fact that ecostats from the US failed to deliver the solid upsurge in job creation markets were hoping for also helped the Australian Dollar hold its gains.
While there are multiple Australian data releases on the calendar this week, one of the most significant causes of ‘Aussie’ movement is likely to be Friday’s Chinese consumer price index.
Sterling
The Australian Dollar trended bullishly against Pound Sterling on Friday, with the UK currency still reeling from a shock crash sparked during the Asian session. Experts believe that news of stern comments from French President Francois Hollande regarding Brexit negotiations triggered automatic trading algorithms and led to a mass Sterling sell-off. After attempting a small recovery, Sterling once again slumped during Friday’s trading, breaking through the lows hit the night before. UK data was not supportive, with industrial and manufacturing production largely weakening further-than-forecast, while the trade deficits widened in August. The Pound approached the weekend trading at fresh multi-year lows against most of its rivals.
The UK’s data calendar is virtually empty this week, leaving the Pound vulnerable to further Brexit speculation. The RICS house price balance for September is due out on Thursday; considering last week’s PMIs had little impact on Sterling it seems unlikely this will generate much movement.
Euro
Positive German industrial production data for August helped the Euro advance on Friday. On a seasonally-adjusted basis industrial output increased 2.5% after July’s -1.5% decline. Forecasts had been for growth of 1%. Annualised production grew 1.9% – nearly five times above expectations – although the previous month’s decline was downwardly revised to -1.3%. European Central Bank (ECB) President Mario Draghi told the International Monetary Fund (IMF) that the Governing Council would continue to support Eurozone growth with monetary policy. There was little new about his speech, with the Eurozone central bank chief once again urging governments in individual member states to up their fiscal policy efforts.
The latest Eurozone ZEW economic sentiment survey could cause significant Euro volatility on Tuesday.
US Dollar
The US non-farm payrolls report disappointed on Friday, weakening the US Dollar and boosting risk-appetite. The Federal Reserve had cited giving the labour market time to improve as one of the reasons for keeping interest rates on hold in September. As a result, the weak NFP result lowered market expectations of tighter US monetary policy in December, although they still remained strong at around 70%. The damage looks set to be limited, however, given the overall big picture for the jobs market remains solid; the 156k figure was -11k below forecast, but August’s figure was revised upwards by 16k. The Fed’s Loretta Mester commented that she believed the jobs report was ‘strong’ and that it still justified hiking interest rates.
Friday’s advance retail sales figures could support the US Dollar if they are shown to have grown 0.4% after August’s -0.3% decline.
Canadian Dollar
Suggestions that the Canadian economy still faces headwinds and uncertainty going forwards dampened appetite for the Canadian Dollar on Friday, despite positive domestic data. Bank of Canada (BOC) Deputy Governor Carolyn Wilkins commented that risks to inflation were tilted to the downside, while noting that the BOC was carefully monitoring highs levels of household debt; both of which unsettled investors. The fact Fed rate hike bets remained firm also weighed on the ‘Loonie’, in spite of significantly better-than-forecast labour market data. The unemployment rate held steady at 7% as forecast, although as the participation rate rose, this may have masked a fall; the net change in employment showed 67k jobs were created against forecasts of just 7.5k.
Tuesday brings the release of Canadian housing starts figures for September.
New Zealand Dollar
Comments from Bill English, the New Zealand Finance Minister, helped to reassure investors on Friday. While the IMF and the World Bank have warned about the global vulnerability to a new financial crisis, English opined that New Zealand was in a strong position to withstand such shocks and would be able to ride out the storm. There was no domestic data released, while the disappointment from the US data helped the New Zealand Dollar make strong advances.
New Zealand’s next Business NZ performance of manufacturing index is released on Thursday. The index is currently showing strong growth thanks to a score of 55.1; any further advance would boost the New Zealand Dollar.
Data Released
October 11th 20.00 EUR Eurozone ZEW Survey (Economic Sentiment) (OCT)
October 11th 23.15 CAD Housing Starts (SEP)
October 13th 08.30 NZD Business NZ Performance of Manufacturing Index (SEP)
October 13th 10.01 GBP RICS House Price Balance (SEP)
October 14th 12.30 CNY Consumer Price Index (YoY) (SEP)
October 14th 23.30 USD Advance Retail Sales (SEP) 0.4%