Australian Dollar
Chinese markets might be closed for the Lunar New Year, but that appears to have done little to limit market volatility and global stocks neared a bear market during the European session. With investors ditching higher-risk currencies in favour of safe-haven assets, the Australian Dollar struggled against most of its currency rivals.
Data published on Tuesday also revealed a decline in the National Australia Bank (NAB) Business Conditions index from 6 to 5 and an unchanged Business Confidence figure of 2 in January. Both December’s results were negatively revised.
As trading continues the Australian reports to be most aware of include the Westpac Consumer Confidence Index for February and December’s HIA New Home Sales.
Sterling
Although the UK’s headline trade balance figures were relatively positive, with the nation’s deficit narrowing by more than anticipated in December, persistent concerns relating to the nation’s balance sheet and growing ‘Brexit’ concerns prevented the Pound from seeing much benefit.
The AUD/GBP exchange rate did edge slightly lower yesterday, but Sterling’s uptrend against its Australian peer lacked momentum. If today’s UK Manufacturing and Industrial Production reports should deliver a positive surprise and show a moderate improvement in output, the Pound could firm as trading continues. However, if the pace of annual manufacturing output come in at -1.4% as anticipated, the Pound could slide.
Euro
With the Euro being perceived as a safe-haven currency, the ‘Aussie’ (along with its higher-risk rivals) plummeted against EUR as global stock worries depleted risk appetite.
AUD/EUR fell by over 1% in spite of ecostats for the Eurozone failing to impress. Germany’s trade balance numbers detailed a narrowing in the nation’s surplus while industrial production in the Eurozone’s largest economy fell by -2.2% on the year in December – a much steeper drop than the -0.6% decline predicted.
Given the lack of Euro-centric ecostats on the cards for today, if market conditions remain unstable the Euro could advance further.
US Dollar
Safe-haven assets might be in the ascendency but bets that the current instability in global markets could make the Fed cautious when it comes to increasing interest rates further in 2016 saw the ‘Greenback’ struggle.
The AUD/USD exchange rate was fairly range bound on Tuesday, holding at the 0.7050+ level as investors awaited commentary from Federal Reserve Chairwoman Janet Yellen. The tone Yellen adopts during her upcoming testimony is likely to be a notable cause of Australian Dollar to US Dollar exchange rate shifts.
Canadian Dollar
The Australian Dollar plummeted against its Canadian counterpart as the week progressed and oil prices climbed. Although IEA cautioned that the extent of market oversupply means that the recovery in ‘black gold’ is likely to be short lived, the Canadian Dollar remained bullish, climbing by over 1% against the ‘Aussie’.
Tuesday’s Canadian Building Permits report also bolstered demand for the ‘Loonie’ by printing at 11.3% in December instead of the 6.2% forecast. Furthermore, some investors interpreted recent comments from Bank of Canada (BOC) Deputy Governor Timothy Lane to mean that the central bank is unlikely to cut interest rates in the near future. Lane intimated that interest rates should not be the only tool used to maintain market stability.
With no Canadian data ahead, market sentiment and commodity price movements will be the main cause of AUD/CAD volatility.
New Zealand Dollar
With Reserve Bank of New Zealand (RBNZ) Governor Graeme Wheeler recently talking down the odds of the central bank cutting interest rates in 2016, the New Zealand Dollar was able to gain on the Australian Dollar on Tuesday.
Further AUD/NZD movement may follow the release of New Zealand’s REINZ House Sales report and Card Spending figures. Retail card spending is forecast to show a rebound in January, month-on-month, following the -0.2% slump recorded in December. Such a result would be New Zealand Dollar positive.