Australian Dollar (AUD) Softens on Lacklustre Westpac Leading Index
The Australian Dollar (AUD) saw limited support in the wake of September’s Westpac Leading Index, with confidence in the economic outlook still muted.
As the growth index slowed from 0.5% to 0.2%, this gave investors fresh cause to doubt the underlying strength of the Australian economy, especially in the face of ongoing Covid-19 disruption. However, with the increasing dovish bias of the Reserve Bank of Australia (RBA) already largely priced into AUD exchange rates, this limited their potential for fresh losses yesterday.
Nevertheless, dovish commentary from RBA deputy governor Guy Debelle could still see the ‘Aussie’ soften today.
Pound (GBP) Surges on UK-EU Trade Talk Hopes
The Pound (GBP) rallied sharply across the board thanks to the latest comments from chief EU negotiator Michel Barnier and reports of Brexit trade talks resuming.
Markets were encouraged by the nature of Barnier’s comments, which showed a degree of optimism over the possibility of the UK and EU still reaching a trade deal before the end of the year. Sterling sentiment received a further boost from a stronger consumer price index reading earlier in the session.
If the CBI industrial trends orders index remains trapped deep in negative territory in October, though, this may knock some of the wind out of the Pound’s sails.
Euro (EUR) Performance Mixed Ahead of Consumer Confidence Index
The Euro (EUR) saw a mixed performance overnight, in part benefitting from a decline in safe-haven demand.
Fresh commentary from European Central Bank (ECB) policymakers offered limited support to the single currency, with signs still pointing towards further monetary loosening measures to come. Lingering doubts over the relative health of the Eurozone economic recovery continued to limit the upside potential of EUR exchange rates, with Covid-19 restrictions looking set to drive a fresh slowdown.
Another decline in the Eurozone consumer confidence index may see the single currency shedding fresh ground tonight, however.
US Dollar (USD) Trends Lower on Growing Election Anxiety
The US Dollar (USD) came under increasing pressure as investors await US stimulus news and anxiety over the upcoming presidential election mounted.
With less than two weeks left before the election, markets proved increasingly wary of the potential for a political upset or a contested result, leaving the US Dollar on the back foot. The US Dollar weakened as improved market sentiment weighed on USD safe-haven demand due to continuing fiscal stimulus hopes.
Another underwhelming week of initial and continuing jobless claims figures could see USD exchange rates shed further support, with labour market weakness likely to weigh on investor sentiment.
Canadian Dollar (CAD) Unable to Capitalise on Inflation Data
The Canadian Dollar (CAD) failed to push higher as September’s monthly inflation rate remained at a lacklustre -0.1%.
Even though the headline annual inflation rate showed a solid improvement, climbing from 0.1% to 0.5%, this failed to lift the Canadian Dollar. Focus also fell on the latest Canadian retail sales data, which saw a much smaller increase on the month than forecast. With sales growth at just 0.4%, rather than 1.1%, signs still point towards a slowdown within the Canadian economy.
Any fresh weakness within the oil market may add to the weakness of CAD exchange rates thanks to the threat of a fresh global oversupply glut.
New Zealand Dollar (NZD) Shrugs off Credit Card Spending Slowdown
The New Zealand Dollar (NZD) largely benefitted from the relative weakness of its rivals yesterday, recovering some of its lost ground.
While September’s credit card spending showed another sharp decline on the year, clocking in at -9.9%, the ‘Kiwi’ pushed higher against many of the majors. A softer US Dollar offered particular support to NZD exchange rates, with the appeal of higher-yielding assets improving in the face of the hope for a fresh fiscal stimulus deal.
Even so, the New Zealand Dollar remains vulnerable to any deterioration in general market sentiment thanks to its risk-sensitive status.
Data Releases
17:00 EUR Germany GfK Consumer Confidence Index (Nov) -2.8
21:00 GBP CBI Industrial Trends Orders (Oct) -45
23:30 USD Initial Jobless Claims (17/Oct) 860,000
01:00 EUR Eurozone Consumer Confidence (Oct) -15