Weak Manufacturing and Services PMIs Add to US Dollar Softness

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Headlines

  • Australian Dollar Exchange Rates Lacked Direction – Stronger Chinese data may boost AUD
  • Euro Extended Gains on Bullish German Confidence Index – Impact of German political uncertainty continues to fade
  • US Manufacturing and Services PMIs Disappointed Expectations – US Dollar softens as economic outlook dims
  • New Zealand Trade Deficit Failed to Narrow as Far as Forecast – NZD exchange rates remain under pressure

Australian Dollar

Appetite for the ‘Aussie’ weakened ahead of the weekend, with investors lacking any meaningful incentive to favour the antipodean currency. A persistent lack of domestic data kept the Australian Dollar under pressure, given that markets already hold a rather bearish view of the Australian economy. Even the weakness of USD exchange rates was not enough to boost the antipodean currency during Friday’s European session.

This sluggishness is likely to persist today, unless market risk appetite significantly improves on the back of Chinese industrial profits data.

Sterling

YouGov’s November consumer confidence index offered the Pound little encouragement, with the measure falling to its joint-lowest level since the Brexit vote. This does not bode well for the UK economy, with consumer spending looking set to come under further pressure as the ongoing wage squeeze tightens. Even so, the mood towards Sterling still picked up as a result of the latest Brexit-based developments.

However, political jitters remain a downside risk for GBP exchange rates in the near term, with a fair degree of uncertainty still hanging over the subject of Brexit.

Euro

The Euro’s bullish run continued apace on Friday, with the German IFO business sentiment survey surpassing expectations. As both the current assessment and expectations measures showed a solid uptick on the month this offered further evidence of the resilience of the Eurozone’s powerhouse economy. All in all, the negative impact of the political uncertainty in Germany continued to diminish, with signs still pointing towards another strong year of growth for the Eurozone.

A strong showing from this evening’s Italian consumer confidence measure could support the single currency, although the impact of the data is likely to be muted by any fresh political developments.

US Dollar

Confidence in the ‘Greenback’ failed to pick up in the wake of the Thanksgiving holiday, in large part thanks to the relative strength of the Euro. Markets were not impressed by November’s manufacturing and services PMIs, which both fell short of forecast. This suggests that the US economy is not in as strong a state as might be hoped, even though the Federal Reserve still looks set to raise interest rates in December.

With October’s new home sales figure forecast to show a sharp contraction on the month the US Dollar is likely to remain on a weaker footing.

Canadian Dollar

Rising oil prices continued to support CAD exchange rates, with Brent crude striking a fresh two-year high during Friday’s European session. The partial shutdown of a US-Canadian pipeline in the wake of an oil spill has helped to keep prices buoyant, along with hopes of OPEC extending its production limiting agreement. Ongoing US Dollar weakness added to the upside pressure on the Canadian Dollar.

Even so, oil remains volatile and vulnerable to a bout of profit taking, something which could send the ‘Loonie’ on a fresh slump.

New Zealand Dollar

October’s raft of trade data proved rather mixed, as a larger-than-expected rise in exports was matched by a sharper uptick in imports. As a result the trade deficit failed to narrow as far as forecast on the month, putting the New Zealand on a weaker footing. Markets maintain a generally bearish view of New Zealand’s economic outlook, keeping up the pressure on NZD exchange rates.

Unless market risk appetite improves the potential for a ‘Kiwi’ rally is likely to remain limited today.

Data Released

November 27th 19:00 EUR Italian Consumer Confidence (NOV) 116.4
November 28th 01:00 USD New Home Sales (MoM) (OCT) -7.8%

Post by TorFX

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