Bullish Housebuilding Data Reverses US Dollar Losses

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Headlines

  • AUD Appetite Remained Limited – RBA looks set to maintain dovish to neutral policy bias
  • Budget Anticipation to Limit Pound Upside – UK government continues to show signs of division
  • Rebounding US Homebuilding Sector Boosted US Dollar – Political worries likely to prove short-lived
  • Weaker Canadian Inflation Dented CAD Exchange Rates – Odds of further monetary tightening diminish further

Australian Dollar

October’s mixed labour market data continued to weigh on the Australian Dollar ahead of the weekend, with investors still concerned by the domestic outlook. A solid rebound in new motor vehicle sales was not enough to support AUD exchange rates on Friday, even though this suggests that consumer confidence is somewhat improving. Weakness in the US Dollar equally failed to encourage the antipodean currency, with market risk appetite still generally limited.

The latest commentary from Reserve Bank of Australia (RBA) policymakers is unlikely to benefit the ‘Aussie’, with the tone looking set to remain distinctly dovish in nature.

Pound Sterling

Some of the bullishness of the Pound started to fade on Friday, with the initial impact of the better-than-expected UK retail sales data diminishing. Even so, after a week of softness GBP exchange rates were able to hold onto some of their gains, as investors lacked significant incentive to sell Sterling. With markets still hopeful that the UK and EU negotiators will be able to secure some form of agreement on Brexit before the end of the year the downside potential of the Pound was temporarily limited.

As anticipation builds for Chancellor Philip Hammond’s latest Budget, however, Sterling looks set to remain under some degree of pressure.

Euro

The Eurozone economy continued to demonstrate its strength as September’s current account and construction output data both proved positive. This helped to diminish the impact of European Central Bank (ECB) President Mario Draghi’s recent dovish comments on inflation, buoying the single currency. Signs still point towards the currency union recording its strongest year of growth in a decade, keeping EUR exchange rates generally supported.

Any uptick in October’s German producer price index data may fuel bets that inflation will pick up again in the coming months, potentially giving the ECB greater cause for confidence.

US Dollar

As the impact of the hurricane season continued to abate US homebuilding surged higher in October, with housing starts leaping 13.7% on the month. However, the ‘Greenback’ struggled to capitalise on this bullish data thanks to an increasing sense of uncertainty over domestic politics. News of progress in the investigation into Russian involvement in the Trump election campaign, with several officials being subpoenaed by the special attorney, saw USD exchange rates weighed down by renewed jitters.

Even so, a rebound in the US leading index should boost the US Dollar this evening, offering another sign of economic strength.

Canadian Dollar

Canada’s latest inflation data offered no real surprises to investors, with inflationary pressure easing from 1.6% to 1.4% on the year as forecast. Naturally this supported speculation that the Bank of Canada (BOC) will remain on hold for the foreseeable future, leaving CAD exchange rates on a weaker footing. As oil prices clocked their first weekly loss in six weeks this added to the pressure on the Canadian Dollar.

If the odds of further oil production cuts appear to diminish further then the ‘Loonie’ is likely to lack any particular support today.

New Zealand Dollar

A slight dip in the New Zealand manufacturing PMI only added to the bearishness of the ‘Kiwi’, even though the measure remained firmly in expansion territory. Investors are still nervous of the centre-left government, continuing to shy away from the New Zealand Dollar in favour of its various rivals. With the third quarter producer price index data failing to accelerate this left NZD exchange rates in their slump.

However, a stronger showing from this morning’s services PMI or food inflation figure may be enough to offer the New Zealand Dollar a rallying point.

Data Released

November 20th 07:30 NZD Services PMI (OCT) 56.5
November 20th 07:45 NZD Food Prices (MoM) (OCT)
November 20th 17:00 EUR German Producer Price Index (YoY) (OCT) 2.7%
November 21st 01:00 USD Leading Index (OCT) 0.5%

Post by TorFX

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