Australian Dollar (AUD) Pushes Higher despite RBA Interest Rate Cut
The Australian Dollar (AUD) pushed higher yesterday as the Reserve Bank of Australia’s (RBA) interest rate cut failed to weigh on sentiment for long.
As the move to cut interest rates to a fresh record low of 0.1% was widely anticipated this limited its impact on the Australian Dollar. While the meeting was largely dovish in nature, AUD exchange rates still found support on Tuesday, benefitting from the relative weakness of the US Dollar ahead of the presidential election result.
Confirmation that Australian retail sales saw a smaller contraction on the month in September may help to limit the potential for ‘Aussie’ losses today.
Pound (GBP) Sees Limited Recovery as Lockdown Anxiety Eases
The Pound (GBP) struggled to find any particular direction on Tuesday as the initial impact of the impending UK lockdown faded.
While anxiety over the outlook of the UK economy remains, with the shutdown of non-essential shops looking set to drag on growth in the fourth quarter, GBP exchange rates found some renewed support. In the absence of any fresh UK data releases the Pound was unable to stage any significant rally, however.
If the finalised UK services PMI shows that the sector lost momentum in October, this could see the Pound trending lower once again.
Euro (EUR) Softens as French Budget Deficit Widens
The Euro (EUR) remained under pressure in the face of a widened French budget deficit and plunging Spanish tourist arrivals.
With the French economy already set to come under greater pressure in November, the widening of the budget deficit left investors with little cause for confidence. As Spanish tourist arrivals saw a -87.1% fall on the year in September, this added to concerns over the health of the Eurozone economy, with weaker Spanish growth set to drag on the overall performance.
As long as the finalised Eurozone services PMI falls deeper into contraction territory as forecast, the strength of the Euro looks set to prove limited.
US Dollar (USD) Under Pressure as US Election Result Approaches
The US Dollar (USD) fell largely out of favour last night as tensions ahead of the US presidential election result mounted, and investors priced in a Biden win in early trade.
As the Trump camp signalled its intention to legally challenge the vote count, the chances of a swift resolution to the current uncertainty appeared to diminish. A contested result would also delay the agreement of any fresh fiscal stimulus package, leaving the US economy exposed to greater negative headwinds in the fourth quarter.
While election headlines look set to dominate the outlook of the US Dollar, any weakening of the ISM non-manufacturing PMIs for October may modestly add to USD volatility.
Canadian Dollar (CAD) Benefits from Modest Oil Price Recovery
The Canadian Dollar (CAD) saw limited support amid speculation over the outcome of the US election.
Bets on the possibility of a Democrat win helped to shore up the Canadian Dollar in the short term in spite of the likely contested result. As oil prices staged a moderate comeback, benefitting from the fading impact of renewed lockdown calls, this offered some support to CAD exchange rates.
However, a widening of the trade deficit in September may encourage the Canadian Dollar to trend lower across the board.
New Zealand Dollar (NZD) Downside Limited by Risk Aversion
The New Zealand Dollar (NZD) benefitted from an increased sense of risk appetite among investors ahead of the US election.
Even in the absence of any fresh New Zealand data the ‘Kiwi’ was able to push higher against many of the majors, capitalising on their relative weakness. Nevertheless, support for the New Zealand Dollar remained fragile in the face of shifting market sentiment.
If the third quarter unemployment rate surges as forecast this morning, the New Zealand Dollar could come under pressure.
Data Releases
08:45 NZD Unemployment Rate (Q3) 5.4%
11:30 AUD Retail Sales (Sep) -1.5%
20:00 EUR Eurozone Services PMI (Oct) 46.2
20:30 GBP Services PMI (Oct) 52.3
00:30 CAD Balance of Trade (Sep) C$-2.6 billion
00:30 USD Balance of Trade (Sep) $-63.8 billion