Australia
Tuesday’s RBA November meeting minutes came and went without the Australian Dollar giving a jot. Comments from the RBA concentrated on the importance of the Australian Dollar playing a part in setting future monetary policy. Its business as usual for the RBA unless a sudden market shock event was to surprise. In the event of a strengthening global economy, the effect on the Australian economy and the outcome on the exchange rate of the AUD would be pivotal. The RBA went on to say- if global economic growth was to slow next year the RBA will need the Australian Dollar to weaken to combat the need to cut the cash rate. With markets turning risk averse and the US markets taking a breather with Thanks giving the Aussie could ease back across the board towards the weekly close.
New Zealand
Global uncertainty and a lack of risk appetite continue to be the theme in currency markets at the moment with plenty of risk averse news creating nervous conditions. The kiwi came off last week’s high against the greenback of 0.6870 falling to 0.6780 in thin markets. A wait and see approach with Brexit headlines looming seems to halted any market movement. Liquidity is set to diminish from today with US Thanksgiving holiday closing US equity markets. New Zealand’s population figures for the year to October shows a net gain of 61,700 people, this is the lowest it’s been since September 2015. The biggest drop was the number of people arriving permanently from China down -10.8%. In the past migration figures have been a driver of growth in NZ. No significant local data to publish until next week’s quarterly Retail Sales.
United States
The US Dollar has held its ground this week as US equities have again been under enormous pressures. However the WSJ US Dollar Index which measures the US Dollar against a basket of 16 currencies fell for the sixth occasion in the last 7 sessions dropping 0.2% to 90.26 under a fresh wave of risk liquidation. The combination of less hawkish Fed and tensions around global trade are the main drivers this week. Philadelphia fed member Kashkari supported Powell’s comments last week with further dovish remarks after he said raising the cash rate to fast would have a detrimental effect on the economy. We see little reason why the Fed should pull back from its tightening path with unemployment and growth still strong. Markets could be over analysing a possible USA downturn for 2019. Durable goods orders released showing the biggest decline in factory orders since July 2017 of 4.4% from the 2.6% markets has expected. Thanksgiving holiday will see the week close out uneventfully.
United Kingdom
The British Pound has stalled this week around the 1.2800 area after markets seek further headlines to gauge future movement. Attempts to push out Theresa May with a vote of no confidence have been put off with BOE governor Carney trying to help May with his endorsement of the Brexit deal. Negotiators are said to be close to working through a deal and could have something for the media today. Looking ahead Theresa May will return to Brussels for further talks in an attempt to cement a deal in time for the economic summit in Singapore at the end of the month. With the two sides already agreeing on the draft terms of the agreement in a 585 page document any changes will only be minor. Update: Theresa May met with the EU president Juncker overnight Agreeing on a “political declaration” outlining how the UK- EU trade security and other remaining issues will work. May has signalled the draft agreement on post Brexit relations as “right for the whole of the UK” and said the deal “is within our grasp”.
Europe
The Euro sits at the crossroads right now against the greenback as its tries to determine if it wants to hold current levels around 1.1400, decline through 2017 lows of 1.1300, or make a break higher to September levels at 1.1800. A lot of this outcome will be unveiled as to how the currency trades over the following few European sessions. Conditions have been very quiet this week with further hawkish comments from ECB members Weidmann and Nowotny. Italy’s Prime minister Salvini is prepared to take on the EU in matters relating to the Italian Budget standoff after the EU rejected the countries 2019 budget draft for the second time. He has called for the EU to “respect the Italian people”. Italy is facing sanctions/fines based on not lowering their 2019 forecast deficit of up to 0.7% of the countries GDP with an initial fee of 0.2% which equates to roughly 8 Billion Euro. Italy’s total GDP is around 2 Trillion (USD) pa. Looking ahead tonight we have German and French manufacturing numbers on the calendar.
Japan
The Japanese Yen has been rather stagnant over the course of the week with fundamental market risks around global trade. Bank of Japan’s Kuroda was on the wires but offered up nothing new concerning outlook. Japanese Trade Balance (seasonally adjusted) didn’t disappoint coming in at -0.3 Trillion compared to the -0.48 trillion we were expecting. Japan’s CPI index rose 1.0% y/y in October unchanged on the previous month as the Bank of Japan remain cautious around their inflation outlook. While inflation remains extremely slow the BoJ back their view of achieving their target inflation of 2.0% based on maintaining current momentum. Japan holiday Friday with Labor Thanksgiving Day will ensure the Yen drifts into the weekly close.
Canada
The Canadian Dollar reversed early week losses against the greenback tracking back to 1.3220 as Crude oil came off its low. Crude oil settled at 54.60 up 2.25% Thursday morning after oil inventories rose 4.9M barbells compared to 2.5M expected. Current disputes between the US and China show no signs of being resolved any time soon which will be detrimental for the Canadian Dollar. US vice President Pence was rather blunt in his words regarding a resolution saying that China would need to dramatically change its stance and practices before the US would remove or adjust the current tariffs in place – we await the G20 meeting at the end of the month in Argentina where it will be discussed in further detail with perhaps a resolution. All interest lies with Canadian CPI and Retail Sales printing Saturday morning NZT with an improvement to last month’s -0.4% CPI reading expected.