Australian Dollar Shrugs Off Underwhelming Chinese Growth
A weaker-than-expected Chinese gross domestic product reading failed to drag on the Australian Dollar ahead of the weekend. Although the annual growth rate slowed from 6.2% to 6.0% in the third quarter investors instead focused on an unexpectedly strong industrial production reading. With the Chinese economy showing signs of resilience in the face of ongoing global trade tensions AUD exchange rates found a fresh leg up.
Even so, any signs of weakness in Chinese loan data or deterioration in market risk appetite could easily see the Australian Dollar stumble today.
Pound Under Pressure amid Brexit Developments
As MPs prepared to vote on Boris Johnson’s proposed Brexit deal the Pound struggled to hold onto its earlier sense of optimism. Given Johnson’s lack of a parliamentary majority and the Democratic Unionist Party’s (DUP) opposition to the plan investors saw a significant risk of the proposal’s defeat. As a result, the lingering risk of a no-deal Brexit scenario kept GBP exchange rates under pressure ahead of the weekend.
The fallout from parliament’s vote looks set to dominate the outlook of the Pound in the near future.
Euro Softens as New US Tariffs Kick in
While the Eurozone’s August current account balance proved stronger than forecast this was not enough to shore up the Euro during Friday’s European session. As fresh US tariffs on a variety of EU goods came into force anxiety over the trade outlook of the currency union picked up once again. With the Eurozone economy already slowing in the face of weaker global trade conditions EUR exchange rates weakened in response to the rising risk of a greater slowdown.
Unless Germany’s producer price index figures suggest that inflationary pressure within the Eurozone’s powerhouse economy is strengthening the Euro looks set for further losses today.
Signs of US Growth Slowdown Weigh on US Dollar
September’s CBI leading index cast fresh doubt over the outlook of the world’s largest economy, defying forecasts of positive growth to instead clock in at -0.1%. This latest sign of domestic weakness is likely to encourage a greater degree of dovishness among Federal Reserve policymakers, increasing the odds of an imminent interest rate cut. A greater sense of optimism among investors also limited the appeal of the safe-haven US Dollar.
If worries over the global growth outlook pick up, however, this could offer a boost to USD exchange rates.
Muted Oil Prices Limit Canadian Dollar Support
An increased sense of market optimism helped the Canadian Dollar to gain some traction ahead of the weekend, although this ultimately proved short-lived. With oil prices trapped below the US$60 per barrel mark CAD exchange rates struggled to find much in the way of upside potential. As global oversupply worries built up the commodity-correlated Canadian Dollar came under renewed pressure.
Any improvement in investor sentiment may offer a fresh rallying point to CAD exchange rates, however.
New Zealand Dollar Benefits from Market Optimism
Mixed signals from the Chinese economy were not enough to stop the New Zealand Dollar making some modest gains on Friday. With the US Dollar falling out of favour with investors the appeal of the higher-yielding antipodean currency improved. Even so, a persistent sense of geopolitical uncertainty and concerns over the economic outlook still limited the potential for NZD exchange rate gains.
Without the support of market risk appetite, though, the New Zealand Dollar looks vulnerable to selling pressure.
Data Releases
October 21st 16:00 EUR German Producer Price Index (YoY) (SEP) -0.3%