Supreme Court Ruling Bolsters Pound (GBP) Exchange Rates
The Pound advanced yesterday after the Supreme Court ruled that the prorogation of parliament was unlawful. With MPs set to return to business today investors were encouraged to buy back into the Pound on hopes for a Brexit deal, even though the prospect of further political disruption remains.
However, with the CBI reported retail sales index forecast to remain firmly entrenched within negative territory today the bullish mood of GBP exchange rates could soon fade.
Decline in German Business Expectations Drives Euro (EUR) Exchange Rates Lower
Fresh concerns for Germany’s economic outlook sent the Euro lower yesterday.
Although the German IFO business climate index saw a modest improvement on the month this was ultimately overshadowed by a surprise decline in the accompanying expectations index.
This signal of continued anxiety within the German economy fuelled speculation that a potential recession could still be on the cards. Given the weakness of recent German data this latest sign of bearishness weighed heavily on the single currency.
A similarly disappointing reading from the GfK consumer confidence index may add to the negative mood of EUR exchange rates today.
Weakening Confidence Dents US Dollar (USD)
While the Richmond Fed manufacturing index failed to ease quite as far as forecast, clocking in at -9 rather than -11, the US Dollar still slumped yesterday.
With the world’s largest economy continuing to display evidence of a slowdown the strength of USD exchange rates remained limited. The weakness of the US Dollar was exacerbated by a sharp dip in September’s consumer confidence index, which unexpectedly eased on the month.
Any increase in market risk-aversion could offer USD exchange rates a rallying point in the short term.
Weakening Oil Prices Weigh on Canadian Dollar (CAD) Exchange Rates
A fresh decline in global oil prices dragged on the commodity-correlated Canadian Dollar yesterday. Even though investors now see less risk of the Bank of Canada (BOC) cutting interest rates in the months ahead this was not enough to keep CAD exchange rates on a positive footing. As concerns over the outlook of the oil market remain the mood towards the Canadian Dollar soured.
Unless US oil production shows signs of easing CAD exchange rates look set to remain biased to the downside.
Australian Dollar (AUD) Slides as RBA Signals Intent to Cut Interest Rates
Support for the Australian Dollar diminished in the wake of the latest commentary from Reserve Bank of Australia (RBA) Governor Philip Lowe. As Lowe hinted at further near-term rate cuts, AUD exchange rates broadly softened.
With no fresh domestic data to focus on the Australian Dollar could remain biased to the downside today.
New Zealand Dollar Strengthens After RBNZ Meeting
The New Zealand Dollar edged higher after the Reserve Bank of New Zealand’s (RBNZ) latest interest rate decision. The central bank left interest rates unchanged, as expected, but did indicate that there is scope for more fiscal and monetary stimulus.
The RBNZ stated: ‘The Monetary Policy Committee agreed that new information since the August Monetary Policy Statement did not warrant a significant change to the monetary policy outlook.’
NZD managed to retain gains despite the national trade deficit proving wider-than-forecast.