Australian Dollar (AUD) Shored Up by Construction Strength and Chinese PMI
The Australian Dollar (AUD) benefitted from a sharp 15.4% surge in domestic building permits in September during yesterday’s session, suggesting renewed strength in the Australian construction sector at the end of the fourth quarter.
Meanwhile, an improvement in October’s Chinese manufacturing PMI offered additional support to AUD exchange rates, thanks to the ‘Aussie’s role as a proxy for confidence in the Chinese economy.
However, the mood towards the Australian Dollar looks set to sour today as markets brace for the Reserve Bank of Australia (RBA) to cut interest rates to a fresh record low.
Pound (GBP) Trends Lower as UK Prepares for Fresh Lockdown
The Pound (GBP) fell largely out of favour with investors in the wake of Boris Johnson’s announcement of a fresh national lockdown.
With all non-essential shops ordered to close from Thursday, confidence in the outlook of the UK economy diminished sharply. As the country has already shown signs of losing its earlier growth momentum in the face of lingering uncertainty, this move looks set to push the economy back into a state of slowdown.
Demand for the Pound looks set to remain muted in the near term as markets await the outcome of the latest Bank of England (BoE) policy meeting.
Euro (EUR) Bolstered by Solid Eurozone Manufacturing PMIs
The Euro (EUR) found some limited support on the back of the Eurozone’s finalised October manufacturing PMIs during yesterday’s European session.
As a rise in factory orders spurred the German manufacturing sector to its strongest monthly growth since July 2018, worries over the economic outlook temporarily diminished.
However, as more Eurozone countries look likely to enter lockdown, investors still see high chances of a double-dip recession manifesting in the final months of the year, which could see EUR exchange rates struggling to hold onto a positive footing in the days ahead.
US Dollar (USD) Muted on Growing Election Anticipation
The US Dollar (USD) saw some limited gains in the wake of a stronger-than-expected ISM manufacturing index reading.
While the index jumped from 55.4 to 59.3 in October, signalling major growth for the sector, this was not enough to offset growing jitters over the presidential election. With investors wary of the possibility of a contested result and the potential for recounts, the upside potential of USD exchange rates was ultimately limited.
As the resolution of the election continues to draw closer, the US Dollar looks vulnerable to heightened market anxiety.
Canadian Dollar (CAD) Gains Ground on Manufacturing PMI Resilience
The Canadian Dollar (CAD) pushed higher overnight in spite of a slightly disappointing manufacturing PMI.
As the PMI dipped from 56 to 55.5 in October, suggesting that the sector failed to hold onto all of its momentum, this still showed growth on the month. Meanwhile, CAD exchange rates largely benefitted from the improved sense of market risk appetite stoked by the Chinese manufacturing data in spite of the latest bout of oil market weakness.
If oil prices continue to falter over the course of the day, reflecting growing concerns over the global demand outlook, support for the Canadian Dollar could fade.
New Zealand Dollar (NZD) Struggles despite Risk Appetite
The New Zealand Dollar (NZD) failed to capitalise on the relative weakness of some of its rivals in the absence of fresh domestic data.
With markets in a more risk-positive outlook, NZD exchange rates still struggled to find any particular traction. Even though the New Zealand economy appears more insulated from the risk of renewed global Covid-19 concerns, there seemed little additional headroom for New Zealand Dollar gains yesterday.
As long as market sentiment remains bullish, though, this should keep a floor under the risk-sensitive ‘Kiwi’.
Data Releases
14:40 AUD Reserve Bank of Australia Rate Decision 0.1%