US Dollar Falters on Goods Orders Contraction

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  • Signs Point Towards Improved Australian Economic Growth – Positive Westpac leading index encourages Australian Dollar demand
  • UK Government Borrowing Data Limits Pound Sterling Appeal – GBP remains vulnerable to political developments
  • Durable Goods Orders Contraction Weighs Heavily on US Dollar – USD support limited on Thanksgiving holiday
  • Canadian Dollar Softens on Wholesale Sales Decline – Weak oil market continues to drag on CAD exchange rates

Improved Leading Index Benefits Australian Dollar
A modest improvement in the Westpac leading index helped to shore up the Australian Dollar yesterday, even as global trade tensions remained elevated. Investors were encouraged to find that the index had picked up from -0.02% to 0.08% in October, suggesting greater momentum within the Australian economy. This solid data gave AUD exchange rates a boost in spite of the latest signs of an escalation in the US-China trade spat.
If market risk appetite continues to deteriorate today this could drag on the Australian Dollar.
Pound Under Pressure From Government Borrowing
GBP exchange rates returned to the back foot last night after October’s UK public sector net borrowing data showed a sharp increase on the month. With new government debt of 7.95 billion the mood towards the Pound naturally soured, especially as Brexit-based uncertainty persists. Even so, Sterling’s downside potential was limited thanks to the more positive nature of the year-to-date borrowing figure, which fell to a thirteen year low.
Political developments could see the Pound come under additional pressure later today unless there are signs of increased support for the proposed Brexit deal.
Euro Resilient as European Commission Rejects Italian Budget Again
There was little surprise that the European Commission opted to reject the Italian government’s revised 2019 budget proposal, given the fact that it still breaks deficit rules. This paves the way for the two sides to remain at odds for some months to come, with no obvious compromise in sight at this stage. However, EUR exchange rates only saw limited downside pressure as a result of the development, which had already been effectively priced into the single currency.
The release of the European Central Bank’s (ECB) most recent set of meeting minutes could provoke greater volatility for the Euro.
US Dollar Softens After Sharp Decline in Durable Goods Orders
An unexpectedly sharp slump in October’s durable goods orders saw the US Dollar falter last night. As orders declined -4.4% on the month this suggests that US consumers are taking a more bearish view, something a weaker University of Michigan consumer sentiment index seems to support. Coupled with another disappointing week of initial and continuing jobless claims this left USD exchange rates under pressure, even though the latest existing home sales figure showed a solid improvement.
With US markets closed for the Thanksgiving holiday demand for the US Dollar may prove limited tonight.
Wholesale Sales Slump Weighs on Canadian Dollar
In another blow to the Canadian Dollar wholesale trade sales showed a fresh contraction on the month in September, declining -0.5%. This latest drop in demand suggests that the Canadian economy is in a less robust state of health, adding to speculation that the Bank of Canada (BOC) will adopt a less hawkish policy approach. With the oil market still under considerable pressure as US crude inventories continue to build up there was little reason to support CAD exchange rates.
As long as oil prices remain muted the appeal of the Canadian Dollar is unlikely to materially improve.
New Zealand Dollar Shakes Off Credit Card Spending Dip
Even though credit card spending saw a slight contraction on the month this was not enough to weigh down the New Zealand Dollar. While consumers appear to be reining in their spending markets remain optimistic regarding New Zealand’s economic outlook. NZD exchange rates also benefitted from the relative weakness of the US Dollar and signs that the Federal Reserve could pursue a more gradual course of monetary tightening.
Any increased sense of risk aversion may dampen the mood towards the New Zealand Dollar today, though.

Data Released

November 22nd 23:30 EUR European Central Bank Meeting Minutes (OCT 25)

Post by TorFX

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