Australian Dollar
Last week began well for the ‘Aussie’, with investors shrugging off a deceleration in Chinese Gross Domestic Product and instead fixating on the increasing likelihood of the People’s Bank of China (PBoC) stepping up stimulus.
Although AUD/GBP lost ground as Sterling firmed in the second half of the week, the AUD/USD exchange rate was able to close out the week trading in the region of 0.7012 – up from a low of 0.6834.
Over the next five days the big Australian report to focus on is the nation’s Consumer Price Index for the fourth quarter. Slowing consumer price pressures may send the ‘Aussie’ spiralling lower, while firming inflation would be AUD supportive.
Sterling
The Pound experienced fairly violent currency movement last week, with the AUD/GBP exchange rate moving from a low of 0.4789 to a high of 0.4937.
While Sterling initially slumped in response to growing Brexit concerns and some dovish rate related commentary from the Bank of England (BoE), a positive surprise from UK public finance data bolstered GBP demand before the weekend.
However, if this week’s UK growth data for the fourth quarter provides cause for concern and Asian stock markets stabilise, the Australian Dollar could extend gains against the Pound.
Euro
Last week’s European Central Bank (ECB) interest rate announcement sent the Euro spiralling lower. ECB President Mario Draghi signalled that more stimulus was on the way and the need for this was demonstrated during Friday’s European session when manufacturing and service sector reports for the Eurozone showed a slowing in output.
While the prospect of the deposit rate being cut further into the negative or quantitative easing being expanded weighed on the Euro, the Australian Dollar benefited from the expectation that additional stimulus in the currency bloc could support Australia’s trade prospects.
This week the AUD/EUR exchange rate could fluctuate in response to Germany’s latest business confidence, retail sales and inflation figures. The Eurozone is also set to publish its CPI estimate for January.
US Dollar
The Australian Dollar was able to hold above the 0.70 cents level against the US Dollar at the close of last week in spite of the US Markit Manufacturing PMI printing more strongly than forecast.
The gauge of the US manufacturing sector came in at 52.7 in January, up from 51.2 in December and beating forecasts for a reading of 51.0.
However, the AUD/USD pairing continued to derive support from the expectation that the Eurozone (one of Australia’s main export markets) will see an expansion of fiscal stimulus in the near future.
The US data releases with the most potential to impact USD trading this week include the nation’s Consumer Confidence Index and both durable goods orders and trade figures. Of course, the week’s main event is the Federal Open Market Committee (FOMC) interest rate announcement.
If the Fed indicates that it intends to raise interest rates again in the near future, the ‘Aussie’ could fall back below 0.70 cents.
Canadian Dollar
Rebounding oil prices gave the Canadian Dollar a lift last Friday and helped the ‘Loonie’ firm against a number of its major currency counterparts. A combination of rallying Asian markets and Canada’s main commodity commanding a higher price saw the AUD/CAD exchange rate drop 0.8% before the weekend. With no notable Canadian ecostats due for publication this week, commodity price shifts and global risk sentiment are likely to have the biggest impact on CAD trading.
New Zealand Dollar
Falling dairy prices and below-forecast domestic inflation data pressured the New Zealand Dollar lower last week and the commodity driven currency is likely to experience additional volatility in the days ahead. The Reserve Bank of New Zealand (RBNZ) is due to deliver its first interest rate decision of the year on Thursday and some investors are anticipating a rate cut. If borrowing costs are negatively adjusted the New Zealand Dollar could extend recent losses.
Data Released
Weds 27th 02:00 USD Consumer Confidence (JAN) 96.8
Weds 27th 11:30 AUD CPI (YoY) (Q4)
Thurs 28th 06:00 USD FOMC Interest Rate Decision
Thurs 28th 07:00 NZD RBNZ Interest Rate Decision
Thurs 28th 20:30 GBP UK GDP (YoY) (Q4)
Fri 29th 00:00 EUR German Consumer Price Index (JAN)
Fri 29th 00:30 USD Durable Goods Orders (DEC) -1.1%