Stagnant Retail Sales Pushed AUD Rates Lower

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Headlines

  • Australian Dollar Slumped After Poor Retail Sales – Higher inflation forecast may offer rallying point
  • Strong UK Services PMI Boosted GBP Rates – Signs continue to point towards stronger fourth quarter growth
  • Weak US Wage Growth Weighed on US Dollar Demand – Odds still favour December interest rate hike
  • Canadian Dollar Benefitted from Labour Market Data – Bullish oil prices create risk of profit-taking

Australian Dollar

While the latest services PMI remained in growth territory, in spite of a modest softening, this failed to support the ‘Aussie’ ahead of the weekend. Investors were rather more concerned by an unexpected stagnation in September’s retail sales data, following on from the previous month’s contraction. This suggests that consumer confidence is rather weaker than might be hoped, something which could drag on wider economic growth and give the Reserve Bank of Australia (RBA) more reason to maintain a neutral policy bias.

Even so, the mood towards the ‘Aussie’ could improve if the TD Securities inflation forecast for October proves positive.

Sterling

Comments from Bank of England (BoE) deputy governor Ben Broadbent did not encourage the Pound on Friday, even though he indicated that interest rates are likely to need to rise again. However, the appeal of Sterling strengthened sharply after October’s UK services PMI strongly bettered expectations to jump from 54.1 to 55.8. As this rounded out a trio of positive PMIs investors were encouraged to pile back into the Pound, betting that the fourth quarter will see stronger growth.

In the absence of any major UK data, though, GBP exchange rates are likely to remain biased to the downside today.

Euro

After a Spanish judge remanded eight members of the deposed Catalan government into custody the Euro came under renewed pressure. This sparked fresh unrest within the region, as Catalans decried the move as politically motivated. With prosecutors seeking a European arrest warrant for former president Carles Puigdemont and four other members of his cabinet the potential for a further flare up in tensions weighed heavily on the single currency.

However, if the finalised raft of Eurozone services PMIs point towards stronger economic growth across the currency union this could offer the Euro a rallying point.

US Dollar

The Trump administration’s decision to nominate Fed governor Jerome Powell as the next Federal Reserve Chair did not do much to improve the appeal of the ‘Greenback’. Markets also reacted poorly to October’s labour market data, which proved slightly weaker than anticipated. Of particular concern was an unexpected stagnation in average weekly earnings, which could discourage Fed policymakers from pursuing a more aggressive pace of monetary tightening over the coming year.

Any increase in market risk aversion could benefit the US Dollar over the course of the day.

Canadian Dollar

An uptick in the Canadian participation rate for October helped to fuel a sharp uptrend for the ‘Loonie’, encouraging greater confidence in the domestic outlook. The sustained decline in part-time employment also offered support to CAD exchange rates, suggesting that the health of the domestic labour market is continuing to improve. Bullish oil markets equally added to the positive mood of the Canadian Dollar ahead of the weekend.

Another positive showing from tonight’s Ivey PMI may boost CAD exchange rates further, even though the Bank of Canada (BOC) looks set to remain on hold for some time to come.

New Zealand Dollar

Lacking any support from domestic data the ‘Kiwi’ still managed to push higher on Friday, thanks to a general uptick in market risk appetite. While investors remain concerned over the prospect of reforms to the Reserve Bank of New Zealand (RBNZ) this was not enough to keep NZD exchange rates on a weaker footing at this juncture.

Even so, the New Zealand Dollar could find greater support on the back of an improved RBNZ 2-year inflation expectation report.

Data Released

November 6th 10:00 AUD TD Securities Inflation (YoY) (OCT)
November 6th 12:00 NZD Reserve Bank of New Zealand 2-Year Inflation Expectation (4Q) 2.2%
November 6th 17:00 EUR German Factory Orders (YoY) (SEP)
November 7th 01:00 CAD Ivey PMI (OCT)

Post by TorFX

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