Kiwi Rallies After More Upbeat RBNZ Meeting

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Headlines

  • Contraction in Australian Lending Dented AUD – Increased risk appetite failed to support ‘Aussie’
  • Less Dovish RBNZ Shored up New Zealand Dollar Demand – Markets encouraged in spite of persistent political jitters
  • Euro Bullish on Widening German Trade Surplus – Signs point towards strong 2017 Eurozone growth
  • Sterling Extended Slump as Cabinet Chaos Continued – Confidence in May’s government recedes further

Australian Dollar

September’s home loans data fell significantly short of forecast to deliver a contraction of -2.3% on the month. This weakening of the Australian housing market put renewed pressure on the ‘Aussie’, especially as investment lending was also found to have fallen sharply in the same period. Altogether this points towards diminishing confidence within the domestic economy, something which is likely to keep the Reserve Bank of Australia (RBA) from altering its monetary policy outlook in the near future.

If the latest RBA statement on monetary policy reaffirms a neutral stance then the appeal of the Australian Dollar is likely to remain limited today.

Sterling

While International Business Secretary Priti Patel resigned overnight this did little to alleviate the sense of political chaos gripping Theresa May’s government. With confidence in the abilities of the Prime Minister weakening further investors have seen little reason to buy into Sterling. As the European Commission cut its UK growth forecasts, even assuming that a transitional deal is agreed, this heaped additional downside pressure on GBP exchange rates. Brexit-based uncertainty remains a major headwind for the Pound.

Support could be in store for Sterling this evening, however, if the NIESR gross domestic product estimate indicates that growth remains relatively robust.

Euro

Germany continued to perform well, with September’s trade surplus found to have widened further than expected from 20.1 billion to 24.1 billion. Naturally this suggests that the Eurozone’s powerhouse economy remains in a robust state of health, bolstering demand for the single currency. The optimistic nature of the European Commission’s upwardly revised growth estimates for the currency union also encouraged markets, with the bloc expected to record its fastest growth in a decade this year.

Comments from European Central Bank (ECB) policymakers could provoke jitters for the Euro ahead of the weekend, with the general tone likely to remain more dovish than not.

US Dollar

Confidence in the US Dollar diminished further on Thursday, with markets still repricing the odds of promised corporate tax reforms coming before the end of the year. Larger-than-expected upticks in the latest jobless claims figures did little to help USD exchange rates, even though the labour market on the whole remains relatively tight. A general increase in market risk appetite equally limited the appeal of the ‘Greenback’, with investors inclined to favour higher-yielding assets instead.

Even so, an increase in the University of Michigan confidence index may still be enough to shore up the US Dollar tonight.

Canadian Dollar

The latest new housing price index data was relatively uneventful, showing steady growth on the year in September. This limited the bullishness of the Canadian Dollar, although optimism in the economic outlook has improved thanks to the more resilient housing market. With oil prices continuing to trend in the region of a two-year high the downside potential of the ‘Loonie’ appears a little muted.

In the absence of any new Canadian data, though, CAD exchange rates could struggle to hold onto any particular momentum in the near term.

New Zealand Dollar

Markets were surprised by the tone of the Reserve Bank of New Zealand’s (RBNZ) policy announcement, which proved rather less dovish than anticipated. As policymakers adopted a more relaxed attitude with regards to the relative strength of the ‘Kiwi’ this suggests that an interest rate cut is an increasingly distant prospect. However, as some sense of uncertainty over the centre-left government persists NZD exchange rates struggled to hold onto their gains for long.

An uptick in retail card spending may give the New Zealand Dollar some extra support ahead of the weekend.

Data Released

November 10th 07:45 NZD Card Spending Retail (MoM) (OCT) 0.6%
November 10th 10:30 AUD RBA Statement on Monetary Policy
November 10th 19:30 GBP Visible Trade Balance (SEP) -12.8 billion
November 10th 23:00 GBP NIESR Gross Domestic Product Estimate (OCT)
November 11th 01:00 USD University of Michigan Sentiment (NOV P) 100.9

Post by TorFX

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