Canadian Dollar Soars on Surprise Unemployment Rate Drop

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  • Australian Construction PMI Slides Deeper into Contraction Territory – Australian Dollar under pressure amid market risk aversion
  • Pound Stumbles as UK House Prices Contract -1.4% in November – Investors remain jittery over Brexit debate
  • US Dollar Weakens After Jobs Data Misses Forecast – Softer wage growth limits odds of 2019 Federal Reserve interest rate hikes
  • Surprise Unemployment Rate Drop Prompts Canadian Dollar Surge – Tightening labour market offers CAD cause for confidence

Australian Dollar Softens as Construction PMI Sinks Further into Contraction

As the Australian construction sector slipped further into contraction territory this did little to improve the mood of AUD exchange rates. Investors were naturally disappointed to find that the PMI had deteriorated from 46.4 to 44.5 in November, indicating continued weakness within the Australian economy. Coupled with the resurgence in market worries over US-China trade relations this limited the appeal of the Australian Dollar ahead of the weekend.

Unless investment lending is found to have picked up on the month this morning AUD exchange rates are likely to remain biased to the downside.

UK House Price Contraction Drags Pound Lower

Confidence in the Pound diminished on Friday as November’s Halifax house price index showed a surprise contraction on the month. As house price growth slumped -1.4% this exacerbated worries over the underlying health of the UK economy in the face of persistent Brexit-based uncertainty, denting GBP exchange rates. Although the Bank of England (BoE)/TNS inflation attitudes survey pointed towards inflationary pressure picking up further in the months ahead this failed to shore up Sterling.

However, GBP exchange rates could find a strong rallying point this evening if the UK gross domestic product shows an acceleration in growth on the month.

Fresh Signs of German Weakness Fail to Weigh Down Euro

The German economy continued to demonstrate signs of weakness as October’s industrial production figures showed a -0.5% contraction on the month. With the Eurozone’s powerhouse economy still under pressure as a result of easing global growth and trade tensions the appeal of the Euro was limited. However, EUR exchange rates were able to recover some ground ahead of the weekend thanks to the disappointing nature of the latest US jobs data.

A narrowing of the German trade surplus, though, could easily spark a fresh slump for the single currency today.

Underwhelming Jobs Report Dents US Dollar Demand

USD exchange rates came under renewed pressure heading into the weekend as November’s non-farm payrolls report fell short of expectations. As the headline payrolls figure clocked in at 155,000 rather than the 198,000 forecast this undermined demand for the US Dollar. Although the labour market still remains in a fairly robust state of health investors were further discouraged by lacklustre wage growth data. All in all, the report pointed towards the Federal Reserve leaving interest rates on hold for longer in 2019.

Even so, as long as the threat of fresh US tariffs continues to hang over markets the losses of the US Dollar are likely to prove limited.

Surprise Unemployment Rate Drop Boosts Canadian Dollar

Demand for the Canadian Dollar surged after November’s jobs data smashed expectations and the unemployment rate unexpectedly dropped from 5.8% to 5.6%. This gave investors fresh cause for confidence in the outlook of the Canadian economy, with the participation rate also showing an improvement on the month. As OPEC agreed a fresh production cut CAD exchange rates returned to a bullish trend during Friday’s European session.

The Canadian Dollar could struggle to hold onto its gains overnight, however, if the Canadian housing market demonstrates fresh signs of weakness.

New Zealand Dollar Remains Under Pressure Thanks to Trade Worries

Worries over the latest deterioration in trade relations between the US and China helped to limit the appeal of the New Zealand Dollar last week. The threat of further trade tariffs and slowing global growth weighed heavily on the risk-sensitive currency in the absence of any fresh domestic data. Even though the US Dollar came under pressure, thanks to disappointing jobs data, this was not enough to boost NZD exchange rates.

This morning’s manufacturing sales data could offer the New Zealand Dollar a rallying point, provided there is a significant uptick on the year.

Data Released

December 10th 08:45 NZD Manufacturing Sales (YoY) (3Q) 
December 10th 11:30 AUD Investment Lending (OCT) 
December 10th 18:00 EUR German Trade Balance (OCT) 17.7 billion
December 10th 20:30 GBP Gross Domestic Product (MoM) (OCT) 0.2%
December 11th 00:30 CAD Building Permits (MoM) (OCT)

Post by TorFX

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