- Australian Dollar Under Pressure as Risk Appetite Eases – Stronger business confidence may encourage rally
- Reports of ‘Almost Ready’ Brexit Treaty Boost Pound – GBP exchange rates remain volatile over Brexit speculation
- Canadian Dollar Gains Ground as Oil Prices Surge – Saudi Arabia commits to lower oil production
- Soft Retail Sales Limit New Zealand Dollar Demand – Underwhelming food price index may encourage NZD selling
Australian Dollar Struggles to Find Support
Confidence in the Australian Dollar remained generally limited at the start of the week, lacking the support of any fresh domestic data. Worries over the outlook of the Australian economy persisted in the wake of Friday’s disappointing lending data, keeping AUD exchange rates on the back foot. Markets continue to see the Reserve Bank of Australia (RBA) staying on hold for the foreseeable future, further limiting the appeal of the Australian Dollar.
An uptick in the latest NAB business confidence index may encourage AUD exchange rates to push higher this morning, however.
Brexit Anxiety Encourages Pound Volatility
Speculation over Brexit prompted significant volatility for the Pound yesterday as investors continued to fret over the risk of the UK leaving the EU without any deal in place. While Theresa May struggles to rally support within the cabinet for her Brexit proposals the chances of any imminent deal remain slim. However, after reports emerged of chief EU negotiator Michel Barnier stating that the Brexit treat is ‘almost ready’ GBP exchange rates were able to recover some of their earlier losses.
If UK average weekly earnings show an acceleration in the three months to September this could encourage the Pound to push higher across the board.
Euro Softens as Investors Brace for Italian Budget Showdown
Demand for the Euro diminished further overnight as investors braced for an escalation in the budget dispute between Italy and the European Commission. With the Italian government refusing to alter its controversial budget deficit target the two sides look set to clash further over the course of the week. As confidence in the outlook of the Eurozone economy has already deteriorated this left EUR exchange rates struggling to find traction.
Another decline in the German ZEW economic sentiment index may prompt the Euro to lose further ground today.
Risk Aversion Supports US Dollar Exchange Rates
The increased sense of political risk in Europe helped to propel the US Dollar higher overnight, capitalising on the weaker Euro. With market risk appetite easing the safe-haven USD found fresh support against its rivals. As investors remain confident in the prospect of a December Federal Reserve interest rate hike the downside potential of USD exchange rates appears limited, even as trade tensions with China persist.
Any improvement in the NFIB small business optimism index is likely to offer the US Dollar an additional boost tonight.
Saudi Production Cut Shores up Oil and Canadian Dollar
Oil prices surged higher at the start of the week in the wake of comments from Saudi Energy Minister Khalid Al-Falih. As Al-Falih announced that Saudi Arabia will cut its oil production in December by half a million barrels a day this shored up the oil market. This decision raised hopes that a coordinated OPEC-led production cut could be in store next year, easing investor concerns over the prospect of a worsening global oversupply glut.
However, the Canadian Dollar remains vulnerable to downside pressure today if oil prices fail to extend their uptrend.
Retail Spending Decline Weighs on New Zealand Dollar Demand
A sharp slowdown in New Zealand retail card spending limited the appeal of the New Zealand Dollar yesterday. As spending only rose 0.1% on the month in October, as opposed to growth of 1.1% in September, this suggests that consumers are taking a more cautious outlook. The decline does not bode well for the domestic outlook, keeping NZD exchange rates under pressure.
Unless this morning’s food price index impresses the New Zealand Dollar may falter, with weaker inflationary pressure giving the Reserve Bank of New Zealand (RBNZ) greater cause for dovishness.
November 13th 08:45 NZD Food Prices (MoM) (OCT) 0.4%
November 13th 11:30 AUD NAB Business Confidence (OCT) 8
November 13th 20:30 GBP Average Weekly Earnings (3M/YoY) (SEP) 3.0%
November 13th 21:00 EUR German ZEW Economic Sentiment (NOV) -26
November 13th 22:00 USD NFIB Small Business Optimism (OCT) 108
Post by TorFX