Pound Strengthens in Spite of Stagnation in Monthly UK GDP

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  • Rebound in Consumer Confidence Fails to Boost AUD – Global trade worries continue to weigh on Australian Dollar
  • Pound Shakes Off Stagnant Monthly GDP – Optimism over potential Brexit progress shores up GBP exchange rates
  • New Zealand Dollar Remains Weak in Spite of Retail Spending Uptick – Worries over domestic outlook persist
  • Canadian Dollar Falls Out of Favour on Soft Housing Data – Oil market jitters weigh on CAD

AUD Exchange Rates Weaken in Spite of Stronger Consumer Confidence

The general sense of market risk aversion kept the Australian Dollar on a weaker footing yesterday, even as October’s Westpac consumer confidence index picked up on the month. Although sentiment improved this was not enough to reverse the decline seen in September, indicating that domestic confidence remains muted. All in all, investors saw little incentive to favour the Australian Dollar in the face of persistent global trade jitters and underwhelming domestic data.

As forecasts point towards a steady consumer inflation expectation reading the potential for an AUD exchange rate rally looks limited this morning.

Brexit Hopes Offer Support to Pound Sterling

August’s UK gross domestic product proved disappointing as growth unexpectedly stagnated on the month. This failed to weigh on GBP exchange rates, however, as the three-month rolling GDP showed solid growth of 0.7%, suggesting greater economic resilience. Demand for the Pound also improved in response to increased hopes of an imminent Brexit deal, with some officials expressing optimism that a deal could be struck by Monday. While concrete signs of progress remain lacking this was still enough to shore up GBP exchange rates.

If the RICS house price balance eases in September, though, this could drag on the Pound today.

Euro Strengthens on Italian Finance Minister Comments

Comments from Italian finance minister Giovanni Tria helped to shore up the Euro overnight as he pledged to ‘do everything we can to regain the confidence of markets’. This more conciliatory tone encouraged investors, giving EUR exchange rates a modest boost as Italian bond yields saw a decline. However, confidence in the outlook of the Eurozone economy remains generally muted, preventing any major rebound in the single currency for now.

In the absence of any fresh Eurozone data EUR exchange rates may struggle to hold onto a stronger footing for long.

Mixed US Data Eases USD Bullishness

The bullishness of the US Dollar took a dent last night as September’s annual producer price index eased further than forecast, dipping from 2.8% to 2.6%. Although inflationary pressure within the US economy appears to remain elevated this slowdown still left USD exchange rates exposed to weakness. Even so, better-than-expected US wholesale inventories data highlighted the continued strength of the world’s largest economy, keeping up the odds of another 2018 Federal Reserve interest rate hike.

A disappointing consumer price index result, however, may diminish the appeal of the US Dollar more significantly.

Disappointing Building Permits Data Weighs on Canadian Dollar

Support for the Canadian Dollar remained generally lacking yesterday as oil prices slumped sharply, dragging on the commodity-correlated currency. As August’s building permits figure failed to show as much of an improvement as forecast CAD exchange rates struggled to find any traction. With the domestic housing market still showing signs of weakness confidence in the wider economic outlook remains limited.

If August’s new housing price index proves positive, though, this could give the Canadian Dollar a boost.

New Zealand Dollar Fails to Capitalise on Rising Retail Spending

Another solid month of retail card spending failed to encourage any New Zealand Dollar rally yesterday. Even though consumer spending picking up 1.1% in September this was not enough to diminish market worries over the health of the New Zealand economy. With risk appetite limited NZD exchange rates continued to trend lower.

This morning’s food price index could prompt the New Zealand Dollar to extend its losses if the inflation indicator shows a fresh contraction on the month.

Data Released

October 11th 08:45 NZD Food Price Index (MoM) (SEP) 
October 11th 10:01 GBP RICS House Price Balance (SEP) 1.0%
October 11th 11:00 AUD Consumer Inflation Expectation (OCT) 4.0%
October 11th 23:30 CAD New Housing Price Index (YoY) (AUG) 0.5%
October 11th 23:30 USD Consumer Price Index (YoY) (SEP) 2.4%

Post by TorFX

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