Bullish Economic Confidence Pushes US Dollar Higher

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Headlines

  • Lack of RBA Action Weighs on AUD Rates – Markets discouraged by prospect of interest rates remaining low for longer
  • Pound Struggled to Shrug Off Weak UK Sales Data – Hopes of Brexit progress limit downside pressure
  • US Dollar Maintained Dominance on Rising Economic Optimism – Bullish ‘Greenback’ fuels risk aversion
  • Rising NZ Inflation May Offer Support to ‘Kiwi’ – Gains likely to be limited ahead of RBNZ meeting

Australian Dollar

As the Reserve Bank of Australia (RBA) opted to leave interest rates on hold once again the ‘Aussie’ came under fresh pressure. Markets were not encouraged by the persistent dovishness of the accompanying statement, which points towards monetary policy remaining unchanged for some time to come. With the ANZ weekly consumer confidence index also weakening there was little incentive to favour the Australian Dollar on Tuesday.

Any softness in the latest raft of Chinese trade data could weigh heavily on AUD exchange rates today, with the antipodean currency vulnerable to a deterioration in market risk appetite.

Sterling

In another negative signal for the UK economy the BRC like-for-like retail sales figure showed a surprise contraction of -1% on the year. This suggests that consumers are continuing to rein in their spending as a result of the ongoing wage squeeze and Brexit-based uncertainty. However, the Pound only saw limited weakness on the back of this disappointing showing thanks to more encouraging housing market data.

Even so, Sterling remains vulnerable to downside pressure if there are any signs that the latest round of Brexit talks are not progressing as hoped.

Euro

September’s German industrial production figures offered a shock to investors as orders contracted -1.6% on the month, undermining confidence in the outlook of the Eurozone’s powerhouse economy. Signs of weakness within the Eurozone retail sector put further pressure on the single currency overnight, with the latest raft of retail PMIs showing a general loss of momentum within the sector. Altogether this gave European Central Bank (ECB) policymakers further incentive to leave monetary policy on hold for longer.

In the absence of any fresh Eurozone data today the Euro may struggle to find any particular support.

US Dollar

Demand for the US Dollar continued to strengthen on the back of a sharp uptick in November’s IBD/TIPP economic optimism index, which surged from 50.3 to 53.6. With the world’s largest economy continuing to display strong signs of growth the case for a December interest rate hike from the Federal Reserve remains solid. This helped to buoy the ‘Greenback’ further against its rivals, particularly as the labour market showed additional signs of tightening.

Another uptick in MBA mortgage applications could keep USD exchange rates on an uptrend overnight, although the upside potential of the US Dollar looks somewhat limited at this juncture.

Canadian Dollar

Muted market risk appetite kept the Canadian Dollar on a general downtrend, with investors lacking any significant incentive to buy back into the commodity-correlated currency. With the Bank of Canada (BOC) looking set to maintain a neutral to dovish outlook on monetary policy in the coming months the appeal of the ‘Loonie’ is distinctly limited. Even rising oil prices were not enough to boost CAD exchange rates.

Tonight’s Canadian housing starts and building permits figures could offer some support to the Canadian Dollar, though, with investors likely to be encouraged by any signs of strength in the domestic housing market.

New Zealand Dollar

A sharp decline of -3.5% in the Global Dairy Price auction price weighed heavily on the New Zealand Dollar, highlighting the persistent weakness of the commodity market. With markets already in a more risk averse mood thanks to the strength of the US Dollar NZD exchange rates were prompted to extend their recent losses further.

Unless the ANZ truckometer points towards a significant uptick in inflationary pressure demand for the ‘Kiwi’ is likely to remain limited today.

 Data Released

November 8th 07:00 NZD ANZ Truckometer Heavy (MoM) (OCT)
November 8th 22:00 USD MBA Mortgage Applications (NOV 03)
November 8th 23:15 CAD Housing Starts (OCT)
November 8th 23:30 CAD Building Permits (MoM) (SEP)

Post by TorFX

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