Political Anxiety Weighs on Pound (GBP) Exchange Rates
Fears of fresh political turmoil saw the Pound slide yesterday as MPs returned to parliament.
With calls for Boris Johnson’s resignation increasing, investors were spooked by the prospect of an early general election.
Additionally, although September’s CBI reported retail sales index saw an improvement on the month it remained in negative territory.
As long as a sense of political anxiety persists the Pound will remain under pressure.
Strengthening French Confidence Buoys Euro (EUR)
An unexpected improvement in France’s latest consumer confidence index gave the Euro a modest boost yesterday.
The index picked up from 103 to 104, marking its ninth consecutive month of improvement and suggesting a sustained improvement in the French outlook.
However, with markets still expecting to see the European Central Bank (ECB) pursue further monetary loosening in the months to come EUR exchange rates struggled to gain much ground.
The publication of the ECB’s latest economic bulletin may fuel further selling pressure for the single currency.
US Dollar (USD) Rallies on Resilient Home Sales Data
Demand for the US Dollar picked up in the face of a general deterioration in market risk appetite, fuelled by increasing political turmoil in both the US and UK.
As House Democrats initiated a formal impeachment investigation, investors were inclined to adopt a more risk-averse outlook. Support for USD exchange rates also came on the back of August’s new home sales figures, which showed a better-than-expected rebound on the month.
Any widening of the advance goods trade deficit could see the US Dollar stumble later however.
Oil Price Drop has Limited Impact on Canadian Dollar
Another sharp daily decline in oil prices failed to weigh on the Canadian Dollar yesterday, even as US crude oil supplies saw a surprise increase. Although Brent crude saw a decline of -2.6% on the day’s opening level this was not enough to drag on CAD exchange rates.
The Canadian Dollar benefitted from the relative weakness of many of the majors, even as the risk of further Federal Reserve interest rate cuts appeared to increase.
If the CFIB business barometer continues to paint an encouraging picture of the economic outlook CAD exchange rates may maintain their uptrend.
Australian Dollar (AUD) Under Pressure as Risk Appetite Declines
AUD exchange rates remained under pressure overnight as markets continued to price in the likelihood of the Reserve Bank of Australia (RBA) cutting interest rates next week.
After the Reserve Bank of New Zealand (RBNZ) maintained its dovish outlook the risk of further RBA action appeared to increase.
The Australian Dollar was also undermined as a Federal Reserve policymaker signalled a willingness to cut interest rates more aggressively.
An increased sense of global market risk aversion could keep AUD exchange rates on the back foot today.
Lack of RBNZ Action Fails to Boost New Zealand Dollar
While the Reserve Bank of New Zealand (RBNZ) opted to leave interest rates on hold at its September meeting this did little to support NZD exchange rates as policymakers maintained a dovish bias.
With confidence in the economic outlook still muted, NZD exchange rates suffered from the wider decline in market risk appetite.