After weakening in late 2016, following Trump's victory, AUD/CAD strengthened back to around 1.00 in March 2017. Since then, the pair has weakened as the Canadian dollar has done well thanks to strong economic growth and interest rate hikes. As both countries are highly dependent on natural resource exports, the Aussie dollar and the loonie tend to rise and fall together. Thus volatility in this pair is usually fairly low.
The Australian dollar is currently strengthening against all major currencies. The aussie is up the most against the Canadian dollar today. Yesterday, the Australian dollar ended the day slightly lower against the US dollar. Notably, trading volumes in Australian dollar futures accelerated for the fourth session in a row, rising above 30-day averages. While rising volumes are usually notable, this was not the case yesterday as prices only moved by a small degree. Today's AUD/USD trading range remains 0.7080 - 0.7350.
While yesterday's employment changes slowed relative to the previous month (and fell below consensus expectations), foreign exchange traders appeared to be more focused on the falling unemployment rate. While the US dollar was up sharply yesterday, AUD/USD ended the session mostly unscathed. Earlier this week, the RBA's Debelle suggested that wage growth is likely to remain weak thanks to a relatively high rate of unemployment. The RBA has previously communicated its desire to see accelerating wage growth before raising interest rates. Yesterday's data suggests that unemployment is now falling, in turn making a rate hike more likely.
Looking at the aussie today, the currency is rallying in line with a rebound in riskier assets. Following a strong session for most major Asian equity markets this morning, US equity markets and commodities are also rallying. Looking across different asset classes, the S&P 500 is currently up by 0.3% while copper prices are up by more than 1.5% today. As a 'risk on' currency, day-to-day trading in the Australian dollar is often a function of developments in riskier asset classes.
Despite today's rebound, slowing global growth (now with the US entering a slowdown) means that the Australian dollar is likely to remain under pressure. Our outlook on the Australian dollar remains bearish.
AUD/USD is up and trading just above 0.7130. EUR/AUD is flat and trading above 1.6140. GBP/AUD is down slightly and trading above 1.8280. AUD/JPY is up, and trading above 80.20.
|October 16||RBA Meeting Minutes|
|October 17||RBA Debelle Speech|
|October 18||Employment Change SEP||5.6K||44.6K|
|October 18||Full Time Employment Chg SEP||20.3K||33.7K|
|October 18||Unemployment Rate SEP||5%||5.3%|
The Canadian dollar is currently selling off against all major currencies except the Japanese yen. Yesterday, the loonie ended the day sharply lower against the US dollar. For the third session in a row, trading volumes in Canadian dollar futures accelerated relative to the previous session. The combination of recent weakness and rising volumes suggests that traders are selling the loonie with conviction. Today's USD/CAD trading range is 1.2770 - 1.3120.
Following a significant slowdown in year-over-year inflation, the Canadian dollar sold off sharply earlier today. Looking at the figures, headline inflation in September slowed to 2.2%, versus 2.8% in August. Consensus estimates had also called for significantly higher inflation in September. Ahead of next week's Bank of Canada interest rate decision, the significant slowdown in inflation (from its recent peak at 3% two months ago) is a serious concern for Canadian dollar traders. Beyond the recent slowdown, inflation is likely to keep slowing thanks to steepening base effects. In other words, rising inflation at this point last year makes a continued acceleration in year-over-year inflation mathematically more challenging. All else held equal, falling inflation lowers rate hike expectations, in turn weighing on the Canadian dollar.
While September retail sales figures (also announced earlier today) beat the previous monthly figures, note that August retail sales numbers were revised lower. As consumption is a significant proportion of Canada's overall economy, retail sales have a significant impact on the outlook for growth. As retail sales growth has been decelerating in rate-of-change terms this year, it follows that the outlook for Canadian growth is weakening accordingly. Our outlook on the Canadian dollar remains bearish.
The USD/CAD exchange rate is currently above 1.3110. The euro is up against the Canadian dollar, with EUR/CAD currently above 1.510. The pound is up against the Canadian dollar, with GBP/CAD trading above 1.710. CAD/JPY is flat, and currently trading above 85.70.
|October 15||New Motor Vehicle Sales AUG||185.2K||179.6K|
|October 15||BoC Business Outlook Survey|
|October 16||Foreign Securities Purchases AUG||C$2.82B||C$15.29B|
|October 16||Foreign Securities Purchases by Canadians AUG||C$-0.19B||C$13.06B|
|October 17||Manufacturing Sales MoM AUG||-0.4%||0.9%|
|October 18||ADP Employment Change SEP||28.8K||42.7K|
|October 19||Core Inflation Rate YoY SEP||1.5%||1.7%|
|October 19||Inflation Rate YoY SEP||2.2%||2.8%|
|October 19||Retail Sales YoY AUG||3.6%||3.5%|
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