Australian Dollar fails to make gains

28 October 2016 by News Desk   |   SHARE  

Australian Dollar was hit by property and industry reports from Down Under.

Australian Dollar was impacted as data showed sales of new homes slowed from 6.1% growth in August to 2.7% in September, according to currency specialists TorFX.

Meanwhile, the quarterly producer price index also impacted the Australian Dollar as it accelerated from 0.1% to 0.3%, but the year-on-year index slowed from 1% to 0.5%.

This has put a dampener on the recent strong consumer price index data; weaker producer prices soften inflationary pressures.

If this trend were to continue, the Australian Dollar would be affected as the Reserve Bank of Australia may be forced to shift back into an easing bias.

Also softening market appetite is the latest poll by Bloomberg, which shows big financial players such as Commonwealth Bank, Citibank and Societe Generale still expect the RBA to cut rates to a new record low of 1.25%.

New Zealand Dollar (NZD) – The New Zealand Dollar is largely in positive territory, although gains have not been particularly impressive so far today.

US Dollar weakness is providing some upwards movement, but news regarding the dairy sector is working against ‘Kiwi’ tailwinds.

According to the latest data, since dairy pay-outs fell from their 2013-2014 peak the value of the sector’s input on the national economy has near-halved, falling by -NZ$7.5 billion to NZ$8 billion.

Australian Dollar fails to make gains

Pound Sterling (GBP) – The Pound is on mixed form today, able to hold only minor gains versus a number of its currency peers.

Consumer confidence weakened in October (according to the latest GfK survey) falling from -1 to -3 after last month’s rebound to pre-referendum levels. Also dampening investor sentiment is a warning from former Bank of England (BoE) policymaker Adam Posen, who has claimed that Brexit has set the UK on course to return to the low competitiveness and weak confidence in stability seen in the 70s.

Euro (EUR) – Finalised French GDP figures may have weakened on previous estimates but solid growth from Spain is helping to support Euro demand ahead of today’s key German consumer price index.

Actualised French GDP was revised down from 0.3% to 0.2% compared to earlier estimates for the third quarter, while year-on-year GDP was also cut by -0.1% to 1.1%. However, market sentiment has been boosted by the news that Spain continues to post strong economic growth, regardless of the political problems caused by a minority government after two elections in the past twelve months failed to produce a clear winner. The Spanish economy grew 0.7% QoQ and by 3.2% YoY.

US Dollar (USD) – The approach of key economic data is keeping appetite for the US Dollar weak at present, with traders reluctant to adjust their positions before the day’s announcements.

Annualised third-quarter GDP is expected to be revised up from 1.4% to 2.5%, although personal consumption growth may drop from 4.3% to 2.6%. Federal Reserve rate hike bets are still above 78%, so it is likely appetite for the US Dollar will return after the release of the figures unless GDP surprises to the downside. The slowdown in personal consumption could weigh on the markets, however, and cause inflationary pressures to weaken, giving the Fed a reason to hold fire on policy tightening.

Canadian Dollar (CAD) – A weekend meeting between oil producers belonging to the Organisation of the Petroleum Exporting Countries (OPEC) is keeping the Canadian Dollar soft today.

While a formal announcement containing the details of a proposed cooperative production cut are not expected to be announced until the November 30th meeting, markets are hoping for strong hints regarding the shape of the deal. A lack of belief that OPEC will actually agree a deal is keeping oil prices soft today, dragging the Canadian Dollar down with them.

Disclaimer: This update is provided by TorFX, a leading foreign exchange broker, its content is authorised for reuse by affiliates.

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