Lacklustre Wage Growth Put Australian Dollar Under Pressure

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Headlines

  • Weaker Wage Growth Weighed on ‘Aussie’ – Markets brace for labour market data
  • Pound Rallied on Improved Earnings Figures – Signs still point towards tightening wage squeeze
  • Eurozone Continued to Impress with Widened Trade Surplus – Euro remains on bullish footing
  • Faltering Oil Prices Encouraged Canadian Dollar Selling – Weak manufacturing sales could extend losses further

Australian Dollar

The mood towards the ‘Aussie’ soured sharply on Wednesday as the third quarter wage price index failed to pick up as forecast. Wage growth instead held steady at 0.5% on the quarter, undermining confidence in the health of the domestic economy. A contraction in the Westpac consumer confidence index also eroded the appeal of the Australian Dollar, adding to the Reserve Bank of Australia’s (RBA) incentive to leave interest rates on hold.

However, if October’s labour market data proves positive this could offer the Australian Dollar a rallying point this morning.

Sterling

The Pound was able to recover some of its losses yesterday, as the latest UK wage growth data slightly bettered expectations. Average weekly earnings accelerated to 2.2% on the year in the three months to September, indicating that the tightness of the labour market is starting to feed through somewhat. However, as this remains significantly short of the 3% inflation seen in September and October the squeeze on household finances looks set to persist for some time to come.

As forecasts point towards another disappointing month for UK retail sales, though, Sterling could come under fresh pressure this evening.

Euro

In another positive sign for the Eurozone economy September’s trade surplus unexpectedly widened from 21 billion to 25 billion. This adds to the evidence that the single currency is continuing to experience solid growth in the second half of the year. Naturally the Euro extended its bullish run in response, even though the prospect of greater European Central Bank (ECB) hawkishness remains slim.

Confirmation that Eurozone inflation slipped back to 1.4% on the year in October is likely to see demand for the single currency diminish.

US Dollar

Confidence in the ‘Greenback’ strengthened as the core consumer price index showed a surprise uptick from 1.7% to 1.8% in October. While CPI is not the Federal Reserve’s preferred measure of inflation a stronger showing here still bodes well for the odds of a December interest rate hike. Even so, with imminent monetary tightening already effectively priced into USD exchange rates the upside potential of the US Dollar was still somewhat limited.

As forecasts point towards a dip in the Philadelphia Fed business outlook index the ‘Greenback’ may be vulnerable to renewed losses tonight.

Canadian Dollar

Downside pressure continued to build on oil prices, driving the Canadian Dollar lower across the board. After its recent bullish run crude was forced to cede some of its gains, given ongoing worries over rising US shale production. Jitters over the renegotiation of the North American Free Trade Agreement (NAFTA) also kept CAD exchange rates on a weaker footing overnight.

If Canadian manufacturing sales are found to have fallen in September this is likely to extend the Canadian Dollar’s slide.

New Zealand Dollar

Investors continued to lack appetite for the ‘Kiwi’ yesterday, with an absence of fresh domestic data offering NZD exchange rates little in the way of support. So long as an air of political nerves hang over the domestic economy the New Zealand Dollar may struggle to find any real rallying point. A general lack of market risk appetite has also limited the scope of NZD rates in recent days.

Even so, if the ANZ consumer confidence index shows an improvement on the month the ‘Kiwi’ could find some cause for optimism.

Data Released

November 16th 10:00 NZD ANZ Consumer Confidence (MoM) (NOV)
November 16th 10:00 AUD Unemployment Rate (OCT) 5.5%
November 16th 19:30 GBP Retail Sales (YoY) (OCT) -0.4%
November 16th 20:00 EUR Eurozone Consumer Price Index (YoY) (OCT) 1.4%
November 16th 23:30 CAD Manufacturing Sales (MoM) (SEP) -0.2%
November 16th 23:30 USD Philadelphia Fed Business Outlook (NOV) 24.1

Post by TorFX

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