It was a dramatic night for the Pound, which shed 6.1% against the US Dollar in a two minute window during the Asian session. With the exact cause of the slump unclear Sterling was able to recover quickly, although it remains weaker across the board. Some of the blame for this volatility has been placed on comments from French President François Hollande, whose tough rhetoric seemed to increase the odds of a hard Brexit further. As the latest UK data has also been lacklustre, the Pound is looking distinctly soft ahead of the weekend.
Confidence in the single currency has been somewhat limited on Friday morning, despite the latest German industrial production figures proving stronger-than-expected. While output rebounded solidly on both the month and the year worries remain over the robustness of the domestic manufacturing sector. The relative strength of the US Dollar has also been putting pressure on the Euro, with speculation over a potential Fed rate hike limiting the appeal of the common currency further.
Positive jobless claims data saw the ‘Greenback’ pushed higher against rivals, suggesting that the US labour market has continued to tighten. This seems to bode well for this afternoon’s Non-Farm Payrolls report, which is expected to show a moderate level of job creation. Should the headline figure prove sufficiently bullish then the chances of the Fed raising interest rates imminently will be heightened, a prospect that will boost the US Dollar. Even so, with the ‘Greenback’ already trending higher in anticipation any downside disappointment could see a rapid decline in demand.
Although risk appetite has been relatively hampered this morning the ‘Aussie’ has still been making gains against some of its rivals. In large part this is thanks to a particularly strong improvement in September’s Construction PMI, which rose from 46.6 to 51.4. This indicated that the construction sector, and the domestic housing market by extension, remains in a robust state. Backing up the more hawkish outlook of the Reserve Bank of Australia (RBA), this boosted the Australian Dollar against other commodity-correlated currencies.
New Zealand Dollar
With no fresh domestic data to encourage investor demand the ‘Kiwi’ trended lower, weighed down by the strength of the US Dollar. As the odds of an imminent Reserve Bank of New Zealand (RBNZ) interest rate cut remain high the appeal of the antipodean currency is generally limited. Should the afternoon’s US data prove uninspiring, though, then the New Zealand Dollar could yet pick up some steam ahead of the weekend.
Oil prices have continued to push higher going into the weekend, with Brent crude still trending comfortably above the US$52 per barrel mark. Nevertheless, the ‘Loonie’ has been on muted form ahead of Canada’s September labour market data. Forecasts point towards a rather small uptick in employment, although the unemployment rate is expected to hold steady at 7%. Any signs of weakness are likely to drive investors away from the Canadian Dollar, increasing the chances of the Bank of Canada (BOC) returning to an easing bias.