Falling NZ Unemployment Buoyed New Zealand Dollar

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Headlines

  • Wider Trade Surplus May Boost Australian Dollar Demand – Confidence in health of Australian economy still muted
  • Pound Jittery Ahead of BoE Rate Decision – Less hawkish announcement could prompt GBP slump
  • Bullish Oil Market Continued to Support Canadian Dollar – Dovish BOC maintains pressure on CAD rates
  • ‘Kiwi’ Struggled to Capitalise on Improved NZ Unemployment Rate – New Zealand Dollar failed to hold initial gains

Australian Dollar

While the Australian manufacturing sector lost some of its momentum in October, with the PMI dipping from 54.2 to 51.1, this failed to particularly weigh on the ‘Aussie’. Instead the antipodean currency benefitted from the latest signs of solid growth from the Chinese economy and a weaker US Dollar. As markets waited to find out who the Trump administration will nominate as the next Federal Reserve Chair the appeal of higher-yielding currencies picked up, with speculation pointing towards more dovish pick.

Demand for the Australian Dollar could pick up further this morning if September’s trade balance data shows a widening of the surplus.

Sterling

The UK economy showed further signs of resilience as the latest manufacturing PMI defied expectations to strengthen on the month. This suggests that the sector remained on a solid footing at the start of the fourth quarter, giving investors fresh reason to buy into the Pound. However, while this positive data is likely to encourage the Bank of England (BoE), Sterling soon returned to a weaker footing as markets began to brace for the November policy decision.

If BoE policymakers prove more hawkish than expected this evening, though, GBP exchange rates could find a rallying point.

Euro

Support for the single currency faded somewhat in the absence of any fresh domestic data, with the major Eurozone markets closed to mark All Saints’ Day. Even after Tuesday’s bullish Eurozone data the odds of any imminent shift in policy outlook from the European Central Bank (ECB) remains slim, limiting the appeal of the Euro. Although the mood towards the US Dollar was not overly bullish, however, this failed to shore up EUR exchange rates.

While no change is expected from Germany’s unemployment rate the Euro could benefit from any fresh signs of strength from the Eurozone’s powerhouse economy.

US Dollar

As the ISM manufacturing index slipped further than expected in October this put some pressure on the ‘Greenback’, even though confidence in the underlying health of the US economy persists. In large part this softness was due to market jitters ahead of the latest Federal Open Market Committee (FOMC) meeting. While there were no expectations for policymakers to take action at this juncture this did not prevent investors adopting a more cautious view of the US Dollar overnight.

Confidence in the ‘Greenback’ could pick up if the latest jobless claims figures point towards continued tightening of the domestic labour market.

Canadian Dollar

Even though comments from Bank of Canada (BOC) Governor Stephen Poloz were expected to be dovish in nature the appeal of the Canadian Dollar nevertheless picked up on Wednesday. While signs still point towards weaker growth within the Canadian economy CAD exchange rates were shored up by the persistent bullishness of the oil market. Positive signals from OPEC continued to support Brent crude above the US$60 per barrel mark, offering support to the commodity-correlated ‘Loonie’.

Even so, the Canadian Dollar remains vulnerable to downside pressure in the absence of any encouraging domestic data.

New Zealand Dollar

Demand for the ‘Kiwi’ strengthened sharply in response to a marked dip in the third quarter unemployment rate. Falling from 4.8% to 4.6%, this signalled that the New Zealand economy is in a stronger state than markets have thought. However, as jitters over the policies of the new centre-left government persist the New Zealand Dollar struggled to hold onto its gains for long.

In the absence of any fresh domestic data the ‘Kiwi’ is likely to return to the back foot today.

Data Released

November 2nd 10:30 AUD Trade Balance (SEP) 1200 million
November 2nd 18:55 EUR German Unemployment Rate (OCT) 5.6%
November 2nd 22:00 GBP Bank of England Rate Decision 0.5%
November 2nd 22:00 GBP Bank of England Inflation Report
November 2nd 22:30 USD Initial Jobless Claims (OCT 28) 235,000

Post by TorFX

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