Australian Dollar (AUD) Gains Ground on Covid-19 Vaccine Hopes
The Australian Dollar (AUD) continued to benefit from market optimism over the prospect of a viable Covid-19 vaccine at the start of the week as AstraZeneca announced its vaccine has demonstrated 90% effectiveness in high-level trials.
At the same time, a strong showing from November’s Australian manufacturing and services PMIs also helped to keep AUD exchange rates on a positive footing.
In the absence of any fresh domestic data, however, the ‘Aussie’ may struggle to hold onto its gains as the wider sense of market sentiment shifts.
Pound (GBP) Shakes off Underwhelming UK Services PMI
The Pound (GBP) gained fresh traction against its rivals on vaccine optimism even as the UK services PMI fell into contraction territory in November.
While the PMI weakened dramatically from 51.4 to 45.8 on the month, this was not enough to drag down GBP exchange rates, given that the reading was better than investors had anticipated. A solid showing from the corresponding manufacturing survey offered additional support to GBP exchange rates.
With the CBI distributive trades index looking set to show a fresh decline on the month, however, the appeal of the Pound could weaken tonight.
Euro (EUR) Softens as Eurozone Services Decline Continues
The Euro (EUR) stumbled as the Eurozone service sector slipped even deeper into a state of contraction this month.
Both the German and French services PMIs showed a significant deterioration on the month, highlighting the level of impact that fresh lockdown conditions have had on the economy. While the Eurozone manufacturing sector continued to grow, this failed to outweigh the impact of the poor service sector data.
A negative German Ifo business climate index could see the Euro falling even further out of favour with investors during Tuesday’s European session.
US Dollar (USD) Limits Downside Pressure on Surprise Manufacturing PMI
The US Dollar (USD) found some renewed support overnight as the Markit manufacturing PMI showed a surprise improvement.
Evidence of strengthening momentum within the US manufacturing sector helped to put a floor under USD exchange rates, even in the face of the latest bout of market optimism over Covid-19 vaccine news. A surprise uptick in October’s Chicago Fed national activity index also offered a boost to the US Dollar, suggesting that the economy has fared better in the fourth quarter.
Even so, a decline in the latest US consumer confidence index could still see USD exchange rates shedding ground once again.
Canadian Dollar (CAD) Holds Ground as Oil Prices Rise
The Canadian Dollar (CAD) held onto a positive footing as oil prices staged another day of solid gains during Monday’s European session.
Brent crude climbed more than 1.4% on the day’s opening levels, fuelled by market risk appetite and hopes that the global economy will return to normal sooner rather than later. The prospect of increased global demand for oil improved the appeal of the commodity-correlated Canadian Dollar.
As long as oil markets maintain a bullish mood this should limit the potential for any CAD exchange rate weakness in the near term.
New Zealand Dollar (NZD) Benefits from Surge in Retail Sales
The New Zealand Dollar (NZD) found support as third quarter retail sales staged an unexpectedly strong surge on the month.
As sales growth rocketed 28% in the third quarter, pushing back against the second quarter’s sharp decline, this offered investors fresh cause for confidence in the health of the New Zealand economy. Even so, the positive nature of the data was not enough to keep NZD exchange rates from experiencing some limited pressure overnight as risk appetite shifted.
Without the encouragement of other positive New Zealand data the ‘Kiwi’ may struggle to make any significant headway today.
Data Releases
20:00 EUR German IFO Business Climate Index (Nov) 90.7
22:00 GBP CBI Distributive Trades Index (Nov) -35
02:00 USD CB Consumer Confidence (Nov) 98