Australian Dollar Surges on USD and EUR Weakness

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Headlines

  • ‘Aussie’ Climbs on Weak US Data and ECB Study – Markets return to risk assets
  • AUD GBP Surges on Irish Border Fears – Questions remain over issue of a hard customs border
  • AUD EUR Jumps on Worrying Euro Study – Report claims economies have not been boosted by introduction of the Euro.
  • NZD Surges as Risk-Appetite Reawakens – Investors flock to risky New Zealand Dollar

Australian Dollar

The Australian Dollar was on bullish form at the end of the week, thanks to positive manufacturing data on Friday. Saturday’s early morning US data disappointed forecasts, giving markets even more of an incentive to buy the ‘Aussie’. Australia’s CBA and AiG manufacturing indices both increased, rising to 56.3 and 57.3 respectively.

Volatility for the Australian Dollar will pick up on Tuesday, as the Reserve Bank of Australia (RBA) will announce its latest decision on interest rates.

Sterling

AUD/GBP shot higher on Friday after fears over the Irish border after Brexit returned to sap recent optimism regarding the EU exit negotiations. With the UK set to leave the customs union and single market, there may need to be a physical border between Northern Ireland and Ireland. The Irish government is demanding the UK provide clarity on its plans, or it will veto attempts to move the negotiations onto the topic of trade.

The vital UK services PMI is set for release on Tuesday.

Euro

A damning report published by – but not necessarily representing the views of – the European Central Bank (ECB) on Friday saw the Euro tumble. The survey found that membership of the common currency had done little to boost the economies of the countries that joined it and that early adopters of the shared unit have not seen the kind of narrowed gap between their incomes that was predicted.

Eurozone retail sales figures are set for release on Tuesday.

US Dollar

The US Dollar found some support on Friday from the Euro’s weakness, but Saturday’s early-morning data disappointed. The Markit manufacturing PMI only inched up from 53.8 to 53.9 instead of to 54 as expected, while the ISM index fell further-than-anticipated from 58.7 to 58.2.

US non-farm payrolls – arguably one of the most influential data releases to come from the US – is set for release on Friday, alongside the unemployment rate.

Canadian Dollar

Domestic data sent the Canadian Dollar racing higher on Friday, with the ‘Loonie’ gaining over 1% versus the US Dollar and around 1.5% against the Pound and Euro. Gains against the Australian Dollar were slightly smaller, but still impressive nonetheless. Annualised third-quarter GDP weakened slightly less-than-expected, slowing from 4.5% to 1.7% instead of to 1.6%. But slowing growth was counterbalanced by a surge in employment in November, with the number of people in work climbing nearly eightfold forecasts at 79,500. This pushed the unemployment rate down from 6.3% to 5.9% - impressive considering forecasts were just for a drop to 6.2%.

The Bank of Canada (BOC) is expected to keep rates frozen at 1.00% on Thursday, but the commentary released after its monetary policy meeting could still cause turbulence for the Canadian Dollar.

New Zealand Dollar

Weakness in the Euro and US Dollar benefitted the New Zealand Dollar on Friday. The ‘Kiwi’ was able to record bullish gains versus many of its peers, despite a disappointing terms of trade index for the third quarter. Measuring the difference between the cost of imports and the revenue from exports, the index grew 0.7% instead of slowing from 1.4% to 1.3%.

If the Global Dairy Trade auction on Tuesday results in another drop in dairy prices – which would be the fifth successive decline – the New Zealand Dollar is likely to tumble.

Data Released

December 5th 13.30 AUD RBA Cash Rate Target (DEC 05) 1.50%
December 5th 19.30 GBP Markit/CIPS UK Services PMI (NOV)
December 5th 20.00 EUR Eurozone Retail Sales (YoY) (OCT)
December 5th NZD Dairy Auction Avg. Winning Price MT (DEC 05)
December 7th 01.00 CAD Bank of Canada Rate Decision (DEC 06) 1.00%
December 8th 23.30 USD Change in Non-farm Payrolls (NOV) 198,000

Post by TorFX

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