Australian Dollar Benefits as Markets Brace for US-China G20 Meeting

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Headlines

  • AUD Exchange Rates Find Support Amid Improved Market Sentiment – Investors hope for trade breakthrough at upcoming G20 summit
  • Pound Shakes Off Treasury Brexit Forecasts – GBP exchange rates strengthen in spite of projected hit to GDP
  • Weaker German Consumer Confidence Limits Euro Demand – Single currency vulnerable ahead of German inflation data
  • Canadian Dollar Trends Lower as Oil Prices Fall – Rising US inventories weigh heavily on oil market


Hopes of US-China Trade Progress Shore up Australian Dollar

Markets continued to speculate over the possibility of a breakthrough in trade relations between the US and China at the upcoming G20 summit. This helped to support the risk-sensitive Australian Dollar yesterday, even though some investors remain sceptical over the chances of a de-escalation in tensions. AUD exchange rates also came under pressure as a result of the third quarter Australian construction work data, which showed a -2.8% contraction on the quarter.

The Australian Dollar could find fresh support this morning, however, if the third quarter private capital expenditure data proves encouraging.

Pound Capitalises on Improved Shop Price Index

A modest improvement in November’s BRC shop price index offered encouragement to GBP exchange rates, suggesting that consumers are becoming more confident. This helped to limit the impact of the Treasury’s latest Brexit forecasts, which assessed a wide range of scenarios. As the report pointed towards the UK gross domestic product slowing even in the event of a smooth Brexit this undermined confidence in the economic outlook. Even so, the Pound was still able to gain ground.

If October’s net consumer credit data shows an improvement the Pound could extend its recovery further today.

German Consumer Confidence Continues Decline

With December’s German GfK consumer confidence index declining further on the month the mood towards the Euro remained muted last night. Investors were not impressed to find that sentiment within the Eurozone’s powerhouse economy remains on a downtrend. As the German economy already faces pressure from slowing global demand any domestic weakness puts an additional dampener on the economic outlook. Worries over Italy continued to weigh on the single currency, meanwhile.

Tonight’s German consumer price index data could see EUR exchange rates slump sharply if inflationary pressure shows signs of easing.

Widening Trade Deficit Limits US Dollar Upside

The US economy continued to show signs of vulnerability overnight as October’s advance goods trade deficit widened further than forecast to clock in at -77.2 billion. With the Trump administration threatening to impose fresh tariffs on Chinese imports the economy looks set to come under further pressure as a result of trade tensions. While the second estimate of the annualised third quarter US gross domestic product confirmed solid growth of 3.5% this was not enough to buoy the US Dollar.

An uptick in October’s personal consumption expenditure core reading, though, could give USD exchange rates a boost.

Rising US Oil Stockpiles Drag Canadian Dollar Down

CAD exchange rates came under pressure as the latest US crude oil inventories figure showed a sharp increase in stockpiles on the week. This weighed heavily on the commodity-correlated Canadian Dollar as Brent crude slumped below the psychologically important US$60 per barrel mark once again. Even though markets remain hopeful of the prospect of an imminent OPEC-led production curb this was not enough to prevent this latest bout of weakness.

If the third quarter Canadian current account deficit narrows as forecast, though, this could offer the Canadian Dollar a rallying point.

New Zealand Dollar Benefits as RBNZ Sees Lower Financial Stability Risks

As the Reserve Bank of New Zealand (RBNZ) reported that financial stability risks have eased in its latest twice-annual report this prompted NZD exchange rates to trend higher. An easing in restrictions on high-risk mortgage lending offered additional encouragement to investors, boosting confidence in the domestic outlook. Although the RBNZ looks set to maintain a cautious policy outlook for some time to come this failed to dampen the mood of the New Zealand Dollar yesterday.

Any weakening of November’s ANZ activity outlook index may see NZD exchange rates come under fresh pressure, however.


Data Released

November 29th 11:00 NZD ANZ Activity Outlook (NOV) 
November 29th 11:30 AUD Private Capital Expenditure (3Q) 1.0%
November 29th 20:30 GBP Net Consumer Credit (OCT) 1 billion
November 30th 00:00 EUR German Consumer Price Index (YoY) (NOV) 2.4%
November 30th 00:30 CAD Current Account Balance (3Q) -11.75 billion
November 30th 00:30 USD Personal Consumption Expenditure Core (YoY) (OCT) 2.1%

Post by TorFX

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