Australian Dollar
Closed US markets allowed the Australian Dollar to register bullish gains yesterday, despite a near overwhelming quantity of off-putting news. Citi has suggested that its ‘bubble meter’ is currently indicating an approaching bust, while Moody’s warned that a vulnerable commercial property market is threatening Australian banks. Meanwhile, the future of main trading partner China was thrown into doubt after the International Monetary Fund (IMF) cautioned the Chinese economy was faced with a ‘financial calamity’ thanks to its addiction to debt. Bets of higher US interest rates by the end of December had edged up to 70%, but despite all these factors, low volume US Dollar trading kept investors in the mood for risk-assets.
Considering yesterday’s warnings by Citi and Moody’s, today’s home loans, investment lending and value of loans figures could take on more significance than usual.
Sterling
The Pound was once again registering a grim performance yesterday, with the Australian Dollar to Pound Sterling exchange rate making strong losses. There was no domestic data on the calendar and with little scheduled for release during the rest of the week, the outlook for the Pound could remain bleak. The Confederation of British Industry (CBI) warned that pursuing a ‘hard Brexit’ option risked ‘destroying’ the UK’s open economy. Theresa May stated outright that Parliament would have no vote or say on the Brexit at all, dashing hopes that UK lawmakers may be able to temper the hard line approach apparently favoured by the Prime Minister and her appointed Brexit officials.
A sparse UK data calendar this week leaves Thursday’s RICS house price balance as the most influential item in the docket to influence Pound Sterling movement.
Euro
Investors remained worried by Deutsche Bank, with concerns about the lender’s ability to repay a huge US fine overshadowing positive Eurozone data yesterday. The Euro was mixed overall, but the extent of losses made far outweighed the scope of the day’s gains elsewhere. Deutsche Bank head John Cryan had been in the US over the weekend, attempting to renegotiate the settlement down from US$14 billion. However, so far there have been no positive developments. This was despite an unexpected rise in the German trade balance and a smaller-than-expected decline in the current account. The Sentix investor confidence index registered a stronger-than-forecast rise in sentiment from 5.6 to 8.5, but ironically the Euro remained weak on investor skittishness.
Today’s ZEW economic sentiment survey could distract from the recent Deutsche Bank fears if a rise in confidence is recorded.
US Dollar
The US markets were closed in celebration of Columbus Day, leaving the US Dollar in low demand. As such, the ‘Greenback’ saw mixed trading, reacting to weakness and strengths in other currencies. Federal Reserve rate hike bets remained high, suggesting the US Dollar could find support today.
There is little on the calendar from the States today, although Fed Official Charles Evans could boost the US Dollar as he is due to talk about economy and policy at around midday.
Canadian Dollar
Crude oil hit 15-month highs yesterday, after supportive comments from Russia and Saudi Arabia, causing the Canadian Dollar to rack up bullish gains. Russian President Vladimir Putin, speaking at the World Energy Congress in Turkey, claimed that Russia was ready and willing to join international efforts to curb oil production in order to boost prices. Meanwhile, Khalid al-Falih, Saudi-Arabian Energy Minister, expressed his confidence that other nations would agree to cut production by November, while opining that oil at US$60 per barrel was not unthinkable. This served to send WTI above US$51 per barrel and Brent above US$53.
September’s Canadian housing starts figure could provide some movement for the Canadian Dollar, provided the oil market volatility has calmed to an extent.
New Zealand Dollar
The New Zealand Dollar was weakening yesterday, with investors beginning to wonder if the overvalued ‘Kiwi’ had run out of steam. Relative Strength Indicators (RSI) for the New Zealand Dollar to Australian Dollar exchange rate are currently a matter of basis points away from hitting 70; the point at which a currency is considered overvalued. Its current strength could be making it hard for the New Zealand Dollar to advance further, while making it an unappealing buy for investors seeking risk compared to its peers; the Australian and Canadian Dollars.
New Zealand card spending figures are set for release today.
Data Released
October 11th 08.45 NZD Card Spending Retail (MoM) (SEP) 0.8%
October 11th 11.30 AUD Home Loans (AUG) -1.5%
October 11th 12.30 USD Fed’s Evans Speaks on Economy and Policy in Sydney
October 11th 20.00 EUR Eurozone ZEW Survey (Economic Sentiment) (OCT)
October 11th 23.15 CAD Housing Starts (SEP) 190k
October 13th 10.01 GBP RICS House Price Balance (SEP) 14%