Global overview
The US dollar continues to fall with the USD index now down 3.3% in the month of November. The AUD has benefited from the weaker USD. The AUD’s next moves will be likely driven by today’s retail sales and tomorrow’s monthly inflation reading.
Aussie, kiwi continue to outperform
The greenback continued to decline overnight with the clear shift in US Federal Reserve rate expectations this month driving global equities higher and the US dollar lower.
The USD index fell 0.2% overnight.
The Aussie and the kiwi continue to reap the rewards of the US dollar weakness with the AUD/USD up 0.4% and the NZD/USD up 0.5%.
The AUD remains in focus over the next few days with local retail sales due today and the key monthly inflation reading due tomorrow.
For now, markets only see a 12% chance of an Australian rate hike next week (source: Refinitiv) – but a strong retail sales number and higher inflation result could quickly see a substantial shift in these expectations and boost the AUD.
Pound strength to be tested by retail price index
In recent months, the British Retail Consortium shop price index’s underlying momentum for both food and non-food products has slowed. This might continue in November, which will demonstrate how the UK economy is well into its goods disinflation. October experienced a significant y-o-y decline, mostly due to base effects. It seems that a significant price increase in November of last year will also lower the yearly inflation rate in November of this year.
The yearly rate of store prices should drop further to 4.2% if prices stay the same between October and November (a rather average pace when looking at prepandemic tendencies). It’s possible that it won’t drop as far as we think, but a 4.5% level or less seems likely.
The British pound has gained substantially in November – the GBP/USD is up 4.0% since the start of the month. Today’s BRC index and Wednesday night’s speech from Bank of England governor Andrew Bailey could test this recent strength.
US consumer confidence due
November’s consumer confidence is predicted to drop 2.5 percentage points to 100.1. November saw a 2.5 percentage point decrease in the final University of Michigan consumer mood survey, and international concerns are probably going to keep confidence low. But falling gas prices, a strengthening stock market, and avoided government shutdown ought help lessen the loss of trust.
Improving momentum in China and Europe and a less assertive Fed has weighed on the USD. The USD could gain from increased demand for safe haven assets in foreign exchange due to rising rates, and negative yield-equity correlations.
Aussie, kiwi extend gains
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 27 November – 2 December
All times AEDT
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
