Headlines
• UK Unemployment Hits 7-
Year Low – Pound gains
• US Dollar Falls –
US retail sales disappoint
• AUD Dips after Employment Data –
Losses short-lived
• Fed Rate Hike Bets Falter –
NZD, CAD Gains
Sterling
Tuesday’s negative UK inflation figure saw the Pound tumble as investors revised their Bank of England (BoE) interest rate hike expectations yet again.
Sterling staged a rebound on Wednesday however as an impressive set of UK jobs stats highlighted the limited amount of slack left in the nation’s employment sector.
Average earnings might have increased by less-than-forecast but the UK added 140K positions in the three months through August and the unemployment rate dipped from 5.5% to 5.4%. This marked the lowest rate of joblessness since 2008 and the onset of the global economic crisis.
The Pound promptly climbed back above 1.35 against the Euro and briefly edged above 1.55 against the US Dollar, with the GBP/USD uptrend being aided by the disappointing US retail sales numbers.
With UK data lacking for the rest of the week further Pound movement may be limited.
Euro
As UK employment data impressed and the Eurozone’s Industrial Production numbers fell short, the Euro promptly shed earlier gains against the Pound and put on a patchy performance against its other major rivals.
Industrial Production was shown to have fallen by -0.5% on the month in August, as expected, but the annual figure of 0.9% was half the 1.8% forecast.
Further admissions from Volkswagen regarding 2016 model cars being fitted with software that could cheat emissions tests also weighed on demand for the Euro.
As the European Central Bank (ECB) is due to deliver its interest rate decision next week, any reports which support the case in favour of an expansion of quantitative easing are likely to weigh on the common currency.
The Euro is currently trending in a weaker position against the Pound, US Dollar, Australian Dollar and New Zealand Dollar. Given the lack of Eurozone data scheduled for publication today EUR shifts are likely to be the result of US news.
US Dollar
Federal Reserve interest rate hike expectations were knocked back further on Wednesday as the US Advance Retail Sales number fell short of forecasts. Sales printed at 0.1% in September rather than the 0.2% expected, with August’s figure being negatively revised to 0.0%.
Retail Sales Less-Autos came in at -0.3%, a steeper decline than the -0.1% forecast.
The US Business Inventories report also disappointed by printing at 0.0% in August. Additional pressure was applied to the ‘Greenback’ as the Federal Reserve’s Beige Book highlighted the nation’s ‘sluggish’ manufacturing sector and cited the adverse impact of both a stronger domestic currency and the slowdown in China.
If today’s US Consumer Price Index confirms the easing in price pressures in September expected by economists the GBP/USD exchange rate could reassert itself above 1.55 before the close of trade.
Canadian Dollar
Oil prices may have ended the session slightly lower but the Canadian Dollar was still able to gain on Wednesday. Bets that the Fed will hold off raising interest rates until the US economic outlook brightens lent the commodity-driven currency support in a week almost devoid of impactful Canadian ecostats.
However, the Bank of Canada (BOC) is due to deliver its interest rate decision next week. If the central bank adopts a cautious tone and intimates that borrowing costs could still be negatively revised despite the recent uptick in oil prices we could see an abrupt end to the Canadian Dollar’s bullish run.
Australian Dollar
Concerning Chinese trade and inflation numbers may have taken a toll on demand for the Australian Dollar earlier this week, but falling US interest rate hike expectations have helped progress the commodity-driven currency’s uptrend.
During the local session the ‘Aussie’ initially dipped in response to below-forecast domestic jobs data but shook off losses to close out trading in a stronger position against the US Dollar and Pound.
The Australian economy had been expected to add 9.6K positions in September but actually lost -5.1K, with August’s jobs gain also being negatively revised. Full time employment fell while part-time employment climbed and the participation rate eased.
Separate Australian reports showed a sturdy increase in New Motor Vehicle Sales and a rise in consumer inflation expectations.
New Zealand Dollar
The falling odds of the Federal Reserve increasing interest rates in 2015 kept the New Zealand Dollar buoyed on Thursday. ‘Kiwi’ support also came in the form of upbeat local data, with New Zealand’s Business Performance of Manufacturing Index climbing from 55 to 55.4 and the nation’s Consumer Confidence index rising from 110.8 to 114.9. The New Zealand Dollar is currently trending in the region of a three-month high against the US Dollar.
With New Zealand’s third quarter consumer price index looming, additional NZD movement can be expected.
Data Released Today
USD Initial Jobless Claims (OCT 10)
USD Continuing Claims (OCT 3)
USD Consumer Price Index (YoY) (SEP)
CAD Existing Home Sales (MoM) (SEP)