Outperforming Eurozone PMIs Restore Euro’s Bullish Run

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Headlines

  • Weak US Dollar Boosted Antipodean Currencies – Lack of domestic data leaves ‘Aussie’ vulnerable
  • Pound Slumped Despite Confirmation of 0.4% Quarterly UK Growth – Markets still discouraged by weaker economic outlook
  • CAD Faltered on Disappointing Retail Sales Data – Signs continue to highlight underlying softness
  • Robust Eurozone PMIs Prompted Euro Surge – Currency union still set to post strongest year of growth in a decade

Australian Dollar

Even in the absence of fresh domestic data AUD exchange rates were able to hold onto some gains, largely due to the weakness of a few of its rivals. A softer US Dollar and the closure of US markets for the Thanksgiving holiday offered a degree of support to the Australian Dollar, with market risk aversion limited. However, as the general view of the Australian economy remains bearish the ‘Aussie’ is still rather lacking in upside potential.

Unless market sentiment deteriorates significantly the Australian Dollar looks set to remain on a modestly positive footing going into the weekend, though.

Sterling

While the second estimate of the third quarter UK gross domestic product headline was unchanged at 0.4% this failed to bolster demand for the Pound. This was due to the disappointing nature of the underlying report, which highlighted a continued slowdown in business investment and weaker-than-expected construction output. Coming on the heels of the Office for Budget Responsibility’s (OBR) downwards revisions to its economic forecasts this only compounded the bearish mood of Sterling.

Even if the BBA loans for house purchase figure betters expectations tonight this is unlikely to be enough to shore up GBP exchange rates.

Euro

Confidence in the single currency picked up sharply as the latest round of Eurozone manufacturing and services PMIs pointed towards further economic strengthening. Both France and Germany continued to post solid expansion across these major sectors, keeping the currency union on track for another robust quarter of growth. This limited the detrimental impact of November’s European Central Bank (ECB) meeting minutes, even though policymakers maintained a rather dovish outlook.

Providing the German IFO business sentiment surveys print positively EUR exchange rates look set to recover further ground this evening.

US Dollar

As US markets were closed to mark Thanksgiving Day this left the US Dollar rather lacking in support, with trade volumes thinning further overnight. The latest Federal Open Market Committee (FOMC) meeting minutes also weighed on the ‘Greenback’, with policymakers looking decidedly less clear over the prospect of further tightening action after December. Persistent worries over the inflationary outlook were also stirred up by the minutes, keeping USD exchange rates on a downtrend.

While it is likely to be another relatively quiet day for the US Dollar the November manufacturing and services PMIs could still provoke some volatility tonight.

Canadian Dollar

Demand for the ‘Loonie’ plunged sharply in the wake of disappointing Canadian retail sales data. As sales volumes only showed a modest rebound of 0.1% on the month, as opposed to the forecast 1.0%, confidence in the domestic economy faltered once again. This weaker showing is also likely to entrench the neutral to dovish outlook of the Bank of Canada (BOC), keeping CAD exchange rates in check in the near term.

However, if oil prices continue to pick up this could limit the downside potential of the Canadian Dollar.

New Zealand Dollar

The ‘Kiwi’ continued to recover ground against many of its rivals on Thursday, spurred on as the third quarter retail sales data bettered forecast. Although consumer spending dipped significantly on the quarter the data was still enough to bolster the appeal of the New Zealand Dollar. A stronger sense of market risk appetite also benefitted NZD exchange rates.

This morning’s trade data may undermine the New Zealand Dollar, though, if the trade deficit fails to narrow on the month.

Data Released

November 24th 07:45 NZD Trade Balance (OCT) -760 million
November 24th 19:00 EUR German IFO Business Climate (NOV) 116.6
November 24th 19:30 GBP BBA Loans for House Purchase (OCT) 40,850
November 25th 00:45 USD Manufacturing PMI (NOV P) 55
November 25th 00:45 USD Services PMI (NOV P) 55.4

Post by TorFX

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