October’s Westpac consumer confidence index showed a solid uptick on the month, pointing towards a sustained improvement in the domestic outlook. This offered support to the Australian Dollar, even though this stronger showing is unlikely to be enough to alter the policy outlook of the Reserve Bank of Australia (RBA). Even so, with markets jittery ahead of the latest Federal Open Market Committee (FOMC) meeting minutes the ‘Aussie’ struggled to gain ground against some of its rivals.
Focus will fall on the latest consumer inflation expectation and raft of domestic lending data today, with AUD exchange rates vulnerable to any signs of weakness.
As the Conservative government continued to lack a cohesive approach to Brexit the appeal of the Pound diminished once again. With no signs of progress emerging from the latest round of talks between UK and EU negotiators investors have seen little incentive to support Sterling at this juncture. Chancellor Philip Hammond’s appearance before the Treasury committee did not do anything to improve demand for the Pound, with markets discouraged by his warning that a ‘bad-tempered’ Brexit could be on the cards.
Further volatility is likely in response to the Bank of England’s (BoE) third quarter credit conditions survey, which could undermine the odds of an imminent interest rate hike.
After Catalan president Carles Puigdemont stopped short of a unilateral declaration of independence this offered the Euro a solid boost on Wednesday. Markets reacted positively to this development, even though the Spanish government offered a more lukewarm response to the offer of dialogue. Even so, this still helped to diminish the sense of political uncertainty that had been weighing on the single currency in the wake of the controversial independence referendum, boosting EUR exchange rates.
Another strong showing from this evening’s Eurozone industrial production data could encourage further Euro bullishness.
Chicago Fed President Charles Evans took a less hawkish view overnight, noting that weak inflation may not be entirely the result of transitory factors. This suggests that the policymaker may be less likely to endorse a more aggressive pace of monetary tightening, denting market hopes for an imminent interest rate hike. A sharp drop in the latest MBA mortgage applications figure also weighed on the US Dollar during Wednesday’s European session.
Tonight’s jobless claims data could dent USD exchange rates further if the domestic labour market fails to show signs of tightening.
OPEC officials continued to adopt a more upbeat tone, lifting its forecast for global demand in 2018. However, the Canadian Dollar struggled to particularly capitalise on this news, with the cartel also predicting that prices will remain trapped in the US$50-55 per barrel range. As a result the ‘Loonie’ remained on a relatively soft footing against its rivals, lacking any significant momentum.
Any weakening in the new housing price index may soften the Canadian Dollar, with signs already pointing towards a slowing domestic housing market.
September’s ANZ truckometer proved relatively disappointing, contracting -1.5% on the month to reverse some of August’s strong uptick. This left the New Zealand Dollar to trend lower, giving investors little cause for confidence in the inflationary outlook. With an air of political uncertainty still hanging over the domestic economy NZD exchange rates remained under pressure.
However, if the New Zealand food price index picks up on the month this could bolster hopes that inflation is strengthening.
October 12th 07:45 NZD Food Prices (MoM) (SEP)
October 12th 10:00 AUD Consumer Inflation Expectation (OCT)
October 12th 10:30 AUD Home Loans (AUG) 0.5%
October 12th 18:30 GBP Bank of England Credit Conditions Survey
October 12th 19:00 EUR Eurozone Industrial Production (YoY) (AUG) 2.6%
October 12th 22:30 CAD New Housing Price Index (YoY) (AUG)
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