Australian Dollar (AUD) Climbs Overall as Interest on 3-Year Bonds Skyrockets
The Australian Dollar (AUD) rose through Friday’s session, as the interest rate on the Reserve Bank of Australia (RBA)’s three-year bonds soared towards 0.7%. The central bank initially pledged to keep the rate on these bonds ‘around 0.1%’.
Economists are subsequently concluding that the RBA’s yield curve control (YCC) program is soon to be axed, as the central bank bows to market pressure: despite comments that interest rates will not be increased until 2024, major banks now expect a rate lift as early as 2022.
Looking ahead, today’s final manufacturing PMI may influence trading direction, as manufacturing activity is assumed to have increased in October.
Pound (GBP) Slumps on Lower-Than-Expected Consumer Credit
The Pound (GBP) traded down against the majority of its peers at the end of last week, as the Bank of England (BoE)’s consumer credit release printed below expectations.
Also weighing upon Sterling, the BBC reported yesterday that France had seized a British trawler and fined another one, amid an ongoing spat over post-Brexit fishing rights.
The UK’s final manufacturing PMI may impact GBP exchange rates through today’s session; the Pound will also likely be affected by risk sentiment and ongoing Brexit developments.
Euro (EUR) Lowers on Mixed GDP, Stagflation Fears
The Euro (EUR) slid against its peers on Friday, on mixed GDP and inflationary pressures. While Eurostat reported that the Eurozone economy grew 2.2% in the third quarter, growth slowed in the German economy.
Subsequently, Eurozone inflation rose to 4.1% in October, mainly driven by rocketing energy prices. While other economies rush to tighten monetary policy, the European Central Bank (ECB) repeated that it expects inflationary pressures to ease in 2022 and shows no inclination to raise interest rates.
German retail sales release on Monday may influence EUR trading, if sales growth falls as expected, the Euro may struggle.
US Dollar (USD) Supported by Strong PCE Data
The US Dollar (USD) recouped its losses at the end of last week as the PCE price index met expectations of a 4.4% rise year-on-year. The increase was supported by cost of goods and services.
Increasing inflation helps to fan bets of imminent monetary policy tightening by the Federal Reserve – central bank policymakers are agreed on tapering emergency pandemic support in either mid-November or December.
Tomorrow’s manufacturing PMI could direct USD movement over the next session – a decrease in activity for the month of October is likely to exert downside pressure.
Canadian Dollar (CAD) Wavers as GDP Misses Forecasts
The Canadian Dollar (CAD) traded in a mixed range on Friday as August’s GDP reading came below expectations. The economy expanded by 0.4% in August and looked set to show no growth in September, when supply chain issues hit auto exports.
According to analysts, the third quarter projections make an early rate hike less likely.
New Zealand Dollar (NZD) Sinks on Risk Appetite
The New Zealand Dollar (NZD) reversed its weekly gains at the end of the week, as a risk-off mood predominated following mixed European data. Weaker consumer confidence for October also weighed upon the ‘Kiwi’.
Data Releases
Nov 1st 08:00 AUD Markit Manufacturing PMI Final (Oct) 57.3
Nov 1st 17:00 EUR German Retail Sales (Sep) 0.6%
Nov 1st 19:30 GBP Markit Manufacturing PMI Final (Oct) 57.7
Nov 1st 23:30 CAD Markit Manufacturing PMI (Oct) 55
Nov 2nd 00:00 USD ISM Manufacturing PMI (Oct) N/A