Export Slump Weighs on Australian Dollar
As October’s trade surplus narrowed further than forecast this put fresh pressure on the Australian Dollar. Investors were disappointed to find that export volumes had dived -5% on the month at the start of the fourth quarter, highlighting the economy’s weakness to global trade tensions. While there are still hopes that a US-China trade deal could come through before the end of the year this was not enough to prevent AUD exchange rates trending lower.
With the construction PMI forecast to remain settled in contraction territory the Australian Dollar may struggle to find any positive momentum today.
Stronger Conservative Polling Gives Pound Boost
With polls still pointing towards a Conservative lead ahead of next week’s general election the Pound remained on a positive footing. Markets have effectively priced in a Conservative majority as a near-certainty, in spite of the notoriously fickle nature of UK polls in previous votes. This sense of market optimism helped to offset another month of new car sales decline, even as worries over the outlook of the UK economy mount.
GBP exchange rates may shed some of their positive momentum over the course of the day, however, as political jitters pick up.
German Factory Orders Slump Drags on Euro
Confidence in the German economy took a fresh blow as October’s factory orders data unexpectedly contracted -0.4% on the month. This additional evidence of a slowdown in the German manufacturing sector raised the risks of a weak fourth quarter growth rate, to the detriment of the Euro. EUR exchange rates also came under pressure thanks to a sharper-than-expected drop in Eurozone retail sales, which suggests a softer level of consumer sentiment.
Unless the German industrial production data can deliver a strong showing this afternoon the single currency looks set to shed further ground.
US Dollar Fails to Benefit from Narrowed Trade Deficit
While the US trade deficit narrowed from -51.1 billion to -47.2 billion in October USD exchange rates struggled to capitalise on this improvement. Even with the trade deficit shrinking markets remain wary of the prospect of further tariffs that the White House has threatened to impose on China, France and other nations. With trade conditions looking set to deteriorate further before the end of the year the US economy looks vulnerable to a sustained manufacturing slowdown, leaving the US Dollar exposed to selling pressure.
However, USD exchange rates could find a stronger footing this evening if November’s non-farm payrolls report suggests a renewed tightening of the US labour market.
Sharp PMI Uptick Lifts Canadian Dollar
The Canadian Dollar found support overnight thanks to improved trade figures and a strong surge in November’s Ivey PMI. As the index leapt from 48.2 to 60.0 this smashed market forecasts, demonstrating a significant improvement in economic activity on the month. This sharp uptick reduced the odds of a disappointing fourth quarter growth rate, encouraging the Canadian Dollar to trend higher against many of the majors as the odds of steady Bank of Canada (BOC) policy increased.
A lack of change from the unemployment rate may limit the potential for further CAD exchange rate gains ahead of the weekend, though.
New Zealand Dollar Slips Thanks to Market Trade Worries
With market risk appetite remaining limited the New Zealand Dollar fell further out of favour yesterday, lacking the benefit of any fresh domestic data releases. Although many of the majors came under pressure this was not enough to keep NZD exchange rates on a positive footing at this juncture.
Even so, if hopes of a potential breakthrough in US-China trade talks pick up this may help the New Zealand Dollar to claw back some ground in the near term.
Data Releases
December 6th 07:30 AUD Construction PMI (NOV) 43.1
December 6th 17:00 EUR German Industrial Production (MoM) (OCT) 0.1%
December 6th 23:30 CAD Unemployment Rate (NOV) 5.5%
December 6th 23:30 CAD Change in Non-Farm Payrolls (NOV) 180,000