- Weaker Chinese Manufacturing PMI Encouraged Risk Aversion – Australian Dollar remains under pressure
- Optimistic Brexit Comments Bolstered Sterling Rates – Weak domestic data fails to shake GBP bullishness
- Eurozone Unemployment Rate Dipped Further – Euro supported as economic momentum continues to pick up
- Surprise Canadian GDP Contraction Dented CAD – Odds point towards BOC maintaining its neutral outlook
Another disappointment weighed on the ‘Aussie’ on Tuesday as private sector credit failed to pick up on the year as expected. Coupled with a sharp contraction in the HIA new home sales data this suggests that the Australian economy is not in the strongest of shapes at this juncture. The mood towards the antipodean currency soured further in response to a weaker-than-expected Chinese manufacturing PMI, which weighed heavily on general market risk appetite.
However, if the Australian manufacturing PMI remains firmly in growth territory this may encourage the ‘Aussie’ to return to a stronger footing.
Comments from chief EU negotiator Michel Barnier helped to encourage GBP exchange rates higher, as he noted that he is ready to ‘speed up’ Brexit talks. This raised hopes that negotiations could still proceed to their second phase before the end of the year, prompting the Pound to make solid gains across the board. Even so, there is still a long way to go before the UK and EU are likely to be on the same page on key issues.
Even if the UK manufacturing PMI dipped in October this is unlikely to alter the odds of an imminent Bank of England (BoE) interest rate hike, limiting the downside potential of the Pound.
The mood towards the single currency remained positive thanks to a raft of encouraging Eurozone data. As the unemployment rate fell further than forecast, dropping to 8.9% in September, this bolstered confidence in the outlook of the domestic economy, indicating that the labour market continues to tighten. Better-than-expected gross domestic product data also helped to shore up EUR exchange rates, with the currency union looking on track to outpace US growth for the second year in a row.
While the Catalan crisis continues this is unlikely to particularly weigh on the Euro in the near term, with the chances of independence looking increasingly slim.
Demand for the ‘Greenback’ generally improved on the back of a surprisingly sharp jump in October’s consumer confidence index, which rose from 120.6 to 125.6. This helped to eclipse some of the increased political jitters that have been provoked by latest developments in the investigation into alleged links between the Trump election campaign and Russia. With the US economy continuing to display signs of strength the odds of a December Federal Reserve interest rate hike remain high.
The announcement of the Trump administration’s pick for the next Fed Chair is likely to provoke some degree of volatility for USD exchange rates overnight, particularly if the choice is more dovish.
Confidence in the ‘Loonie’ declined sharply on the back of an unexpected contraction in the August gross domestic product. As growth dipped -0.1% on the month this undermined any particular sense of optimism in the Canadian economy, giving the Bank of Canada (BOC) further reason to leave interest rates on hold. While oil prices remained well-supported this was not enough to shore up the Canadian Dollar overnight.
Another disappointing showing from this evening’s Canadian manufacturing PMI could put further pressure on CAD exchange rates.
New Zealand Dollar
October’s ANZ activity outlook and business confidence indexes both proved rather discouraging, leaving the ‘Kiwi’ on a generally softer footing. Particularly concerning was the sharp contraction in business optimism on the month, which added to the impression that the domestic economy is coming under increased pressure. With market risk appetite lacking there was little to limit the downside potential of NZD exchange rates yesterday.
However, if the third quarter unemployment rate falls in line with forecasts this could give the New Zealand Dollar a boost this morning.
November 1st 07:45 NZD Unemployment Rate (3Q) 4.7%
November 1st 08:30 AUD Manufacturing PMI (OCT)
November 1st 19:30 GBP Manufacturing PMI (OCT) 55.9
November 1st 23:30 CAD Manufacturing PMI (OCT)
November 2nd 00:00 USD ISM Manufacturing (OCT) 3.5%
Post by TorFX