Australian Dollar
After another rocky week of trading, the Australian Dollar approached the weekend on a downtrend, registering losses of more than -1% against the US Dollar, Pound and Euro during the local session.
Although the ‘Aussie’ was briefly bolstered earlier in the week by better-than-forecast Chinese trade data and an unchanged Australian unemployment rate (economists had anticipated an uptick from 5.8% to 5.9%) the falling price of key commodities, including iron ore, oil and copper, ensured that gains were short lived.
With investors questioning the validity of China’s trade figures and risk appetite extremely weak, the Australian Dollar to US Dollar exchange rate slumped from a previous high of 0.7044 to a low of 0.6876.
Currency trading had a volatile start to 2016 and that theme looks set to continue. While Australia isn’t set to publish any particularly high-profile reports this week, China’s growth data and the latest US inflation numbers are liable to have an impact on AUD demand.
Sterling
Global growth concerns and the commodity price crash might be weighing on the Australian Dollar, but the Pound isn’t having a particularly strong start to 2016 either.
Although Sterling was able to register gains against a broadly struggling ‘Aussie’ on Friday, in spite of an unexpected slump in UK Construction Output, the 1.3% GBP/AUD advance merely took the pairing back to the week’s opening levels. Meanwhile, the Pound hit a year low against the Euro and remained trending in the region of an over five-year low against the US Dollar as investors bet that the Bank of England will delay increasing borrowing costs until after the UK’s in/out EU referendum.
Australia’s latest consumer confidence report and house price figures could have an impact on AUD/GBP trading in the days ahead but developments in China and the UK’s upcoming inflation numbers are likely to have more of an influence on the pairing.
Euro
A report indicating that the European Central Bank (ECB) isn’t convinced of the effectiveness of introducing additional stimulus in the near term sent the Euro surging before the close of last week.
The AUD/EUR exchange rate shed over -2% to hit a low of 0.6294. Demand for the Euro had also increased earlier in the week as Germany published encouraging growth data.
In terms of future Australian Dollar to Euro movement, investors should take note of this week’s main news for the Eurozone, namely the region’s inflation data, the German ZEW current situation and economic sentiment surveys and the European Central Bank’s (ECB) first interest rate decision of 2016. If the ECB does indicate that it intends to leave fiscal policy unchanged for the time being, the AUD/EUR pairing could touch fresh lows.
US Dollar
The recent turmoil in global markets has resulted in some Federal Reserve policymakers adopting a more dovish attitude with regards to the central bank’s plans for further interest rate revisions over the course of 2016.
Before the close of last year it had been hinted that four positive adjustments would be made this year, but the Fed may well scale back its plans given current headwinds. However, even the reduced odds of a rate hike occurring in the near future have failed to dampen the US Dollar’s appeal.
The currency’s safe-haven attributes saw it post a third week of gains against most of its rivals on Friday, with the USD/AUD exchange rate trending in the region of 1.4566.
The most high-profile US reports scheduled for release this week include inflation numbers and the nation’s latest Markit Manufacturing PMI.
Canadian Dollar
The ‘Aussie’ selloff at the close of last week saw the South Pacific currency register declines against the Canadian Dollar despite the ‘Loonie’ experiencing weakness of its own.
Plummeting oil prices left the Canadian Dollar in freefall against the US Dollar, with the CAD/USD pairing falling below 0.6900. Crude futures slid further on Friday on the expectation of more Iranian oil imports. Should oil prices continue to slide, the ‘Aussie’ may be able to recover some ground against the ‘Loonie’ this week.
New Zealand Dollar
While both the Australian Dollar and New Zealand Dollar have suffered as a result of the current risk-off environment, the ‘Kiwi’ ended the week up slightly against its Antipodean cousin.
In the week ahead the New Zealand data with the most potential to trigger AUD/NZD fluctuations is the nation’s Consumer Price Index for the fourth quarter. A YoY figure of 0.4% or higher would be NZD supportive.
Data Released
Tues 19th 13:00 CNY GDP (4Q) (YoY) 6.9%
Tues 19th 20:30 GBP CPI (Dec) (YoY)
Weds 20th 10:30 AUD Westpac Consumer Confidence (Jan)
Weds 20th 20:30 GBP ILO Unemployment Rate (3M) (Nov)
Weds 20th 08:45 NZD CPI (4Q) (YoY)
Thurs 21st 00:30 USD CPI (Dec) (YoY) 0.8%
Thurs 21st 00:30 EUR ECB Interest Rate Decision 0.05%