Australian Dollar (AUD) Benefits from Unexpectedly Improved Unemployment Rate
The Australian Dollar (AUD) found some support after August’s unemployment rate delivered an unexpected improvement.
As the unemployment rate dipped from 7.5% to 6.8% on the month, this encouraged hopes that the Australian labour market has recovered some of its footing. Even so, with markets in a generally risk-off mood in the wake of the Federal Reserve’s September policy meeting, AUD exchange rates struggled to gain any traction.
The Australian Dollar may remain on the back foot ahead of the weekend unless the wider market mood turns more bullish.
Pound (GBP) Drops as Bank of England Sounds Cautious Note over Economic Outlook
The Pound (GBP) fell largely out of favour with investors for a short time as the Bank of England (BoE) adopted a dovish outlook on the UK economy.
Although the BoE’s lack of immediate policy action came as no surprise, GBP exchange rates still weakened markedly after the announcement. News that the central bank discussed negative interest rates, in spite of having no current intention of using them, weighed heavily on the Pound.
However, the pound recovered its losses soon after as the European Commission President said she believes a UK-EU trade deal can be agreed before the end of the year and avoid a no-deal Brexit.
A softer month of growth in retail sales may drag on the Pound this evening, as worries over the health of the economic outlook mount.
Euro (EUR) Weakened by Disappointing Drop in Eurozone Car Sales
The Euro (EUR) continued to come under pressure during the European session as the Eurozone’s consumer price index confirmed expectation that the bloc slipped into deflation in August.
The fall of inflation into negative territory will likely cause concern for the European Central Bank (ECB), which may provoke future action. Added to this, ongoing concerns over the resurgence of coronavirus in Europe continue to limit EUR exchange rates.
Meanwhile, scheduled speeches by a couple of ECB policymakers could provide insight into the ECB’s future policy plans, and in turn drive movement in Euro exchange rates.
US Dollar (USD) Support Muted Thanks to Fed Policy Commentary
The US Dollar (USD) remained volatile amid market disappointment stemming from the Federal Reserve’s policy meeting.
Investors appeared underwhelmed by the dovish message, apparently having hoped for the central bank to commit to further monetary stimulus measures. Even so, as both the initial and continuing jobless claims figures showed a drop on the week, this offered the US Dollar some support. While doubts over the outlook of the labour market remain, the improvement was enough to boost USD exchange rates.
An uptick from September’s University of Michigan consumer confidence index may help to shore up the US Dollar further heading into the weekend.
Canadian Dollar (CAD) Under Pressure as Canadian Employment Declines
The Canadian Dollar (CAD) remained on a downtrend as the ADP employment change reading showed a fresh decline in employment.
With the labour market showing fresh evidence of weakness, there appeared little reason to buy into the Canadian Dollar yesterday. Signs that the labour market remains fragile weighed on CAD exchange rates, adding to doubts over the strength of the economic outlook. Meanwhile, a rise in global oil prices failed to shore up the Canadian Dollar.
After the major surge in spending seen in July, forecasts point towards a weaker month of growth for retail sales in August, paving the way for fresh CAD exchange rate losses.
New Zealand Dollar (NZD) Recovers Ground as Impact of Weak GDP Diminishes
The New Zealand Dollar (NZD) began to show signs of recovery as the initial impact of the second quarter gross domestic product report faded.
Although the second quarter saw a major growth contraction of -12.2%, pushing the economy into a technical recession, NZD exchange rates soon recovered some of their lost ground. While the New Zealand Dollar trended sharply lower in the immediate wake of the data, it was soon able to recover some of its losses, benefitting from the relative weakness of some of its rivals.
In the absence of fresh domestic data the New Zealand Dollar looks vulnerable to any fresh shifts in market sentiment today.
Data Releases
16:00 GBP Retail Sales (Aug) 0.7%
18:00 EUR Eurozone Current Account (Jul) €29 billion
22:30 CAD Retail Sales (Jul) 1%
00:00 USD University of Michigan Consumer Sentiment Index (Sep) 75