- AUD Exchange Rates Struggle to Throw Off Fed Rate Hike Bets – Fresh Chinese liquidity measures offer boost to ‘Aussie’
- Comments From Theresa May’s Spokesman Dent Brexit Optimism – Pound slumps as odds of imminent deal diminish
- Budget Spat Between Italy and EU Continues – Euro under pressure as investors worry over prospect of Italian debt crisis
- Canadian Dollar Falls Out of Favour With Weakening Oil Prices – Continued Iranian exports weigh heavily on oil markets
Chinese Liquidity Measures Support Australian Dollar
Yesterday proved to be a volatile day of trading for the Australian Dollar. Increasing odds of an imminent Federal Reserve interest rate hike kept AUD exchange rates on the back foot even in the absence of fresh US data. With the Reserve Bank of Australia (RBA) looking set to leave rates on hold for the foreseeable future the prospect of increased policy divergence between the central banks has limited the appeal of the ‘Aussie’. However, as China took measures to boost liquidity this helped to shore up AUD exchange rates overnight.
A modest uptick in the NAB business confidence index may help to bolster demand for the Australian Dollar this morning.
Pound Softens as May Spokesman Diminishes Brexit Optimism
The mood towards the Pound soured once again at the start of the week, coming under pressure as Brexit-based optimism faded once again. Comments from Theresa May’s spokesman undermined bets that the UK and EU are approaching a deal. As the spokesman indicated that big issues are still yet to be resolved the prospect of a November agreement took a hit, leaving GBP exchange rates exposed to fresh losses.
Without the support of bets on an imminent Brexit deal Sterling looks set to remain biased to the downside today.
Escalating Italian-EU Tensions Limit Euro Appeal
As tensions between the Italian government and EU continued to mount the appeal of the Euro diminished. Markets continue to fear the prospect of a fresh Italian debt crisis as the dispute over budget proposals rumbles on. Confidence in the single currency was also dented by disappointing German industrial production data, which showed an unexpected contraction of -0.3% on the month in August. With the Eurozone’s powerhouse economy still showing signs of vulnerability EUR exchange rates slumped.
If the German trade surplus fails to widen this afternoon the Euro is likely to face additional selling pressure.
Fed Rate Hike Bets Keep US Dollar Shored Up
A general sense of market risk aversion helped to keep the US dollar on a stronger footing overnight, even though fresh US data was absent from the calendar. As markets remain relatively confident in the odds of the Federal Reserve raising interest rates again before the end of the year USD exchange rates have continued to benefit. With the Fed looking set to maintain a hawkish policy outlook for some time to come investors have seen little reason to sell out of the US dollar.
Even though forecasts point towards a dip in the NFIB small business optimism index tonight that is unlikely to alter the mood towards the US Dollar.
Oil Price Slump Weighs Heavily on Canadian Dollar
As oil prices continued to retreat this left the Canadian Dollar on a downtrend against many of the majors. Investors were not impressed as Brent crude fell further away from US$85 per barrel, with reports suggesting that Iran will maintain some of its exports even as US sanctions come back into force. In the absence of any particular sense of market risk appetite CAD exchange rates failed to find any particular support.
An increase in housing starts, however, may offer the Canadian Dollar a rallying point, with a more resilient housing market likely to encourage the Bank of Canada (BOC).
New Zealand Dollar Picks up in Spite of Worries Over RBNZ Outlook
News of the latest Chinese liquidity-boosting measures helped to boost the New Zealand Dollar yesterday, even as the US Dollar strengthened. Even though the threat of an increased policy divergence between the Fed and Reserve Bank of New Zealand (RBNZ) remains this was not enough to keep NZD exchange rates under pressure at this stage.
Unless market sentiment weakens the New Zealand Dollar could hold onto its gains in the near term.
October 9th 10:30 AUD NAB Business Confidence (SEP) 5
October 9th 16:00 EUR German Trade Balance (AUG) 16.2 billion
October 9th 20:00 USD NFIB Small Business Optimism (SEP) 108
October 9th 22:15 CAD Housing Starts (SEP) 208,400
Post by TorFX