Australian Dollar
With investors’ faith in the ability of central banks to stabilise global markets being tested and stocks crashing, a risk-off attitude was adopted during the latter half of the week. While this initially resulted in the Australian Dollar plunging to 0.69 against the US Dollar, the AUD/USD pairing returned to trending in the region of 0.71 as US interest rate hike speculation continued.
The ‘Aussie’ consolidated losses against the Euro on Thursday but was able to trend higher against a broadly softening Pound.
Ahead of the weekend there are a few local reports to focus on, including Australian Home Loans, Investment Lending and Credit Card Balances/Purchases numbers. Market volatility and the weekend’s influential US reports (the nation’s confidence and retail sales stats) are also liable to have an impact on AUD demand.
Sterling
A brief Sterling rally on Wednesday, initiated as investors engaged in a bout of profit taking following the recent GBP slump, came to an abrupt end as the week continued and the UK’s economic outlook darkened.
As tumbling European stocks drove investors away from higher-risk assets, the Confederation of British Industry (CBI) reduced the appeal of the Pound further by cutting its forecasts for UK GDP.
In light of recent UK industrial and manufacturing production stats for December, it’s broadly expected that the UK’s fourth quarter growth data will be negatively revised. That belief has prompted many industry experts to speculate that the Bank of England (BoE) will have no recourse to adjust interest rates before 2017. All-in-all things aren’t looking particularly Pound positive at the moment, which resulted in the AUD/GBP exchange rate clawing back previous losses.
Should today’s UK Construction Output data disappoint, we can expect the Pound to dip further before the weekend.
Euro
Investors flocked to the Euro on Thursday as the latest bout of stock market volatility depleted risk appetite.
With no disappointing Eurozone news coming out of the woodwork, the Euro enjoyed a relatively uninterrupted uptrend and the AUD/EUR exchange rate was driven to a low of 0.6155 during the European session.
However, the Euro could come under pressure before the weekend if the upcoming growth figures for the Eurozone and its largest economies provide cause for concern. As it stands, the rate of annual growth in the currency bloc is believed to have eased from 1.6% to 1.5% in the fourth quarter.
US Dollar
Although Fed Chairwoman Janet Yellen indicated that US interest rates are more likely to be increased than cut in 2016, her remarks during a testimony to the House Financial Services Committee created volatility on Thursday.
Yellen was keen to highlight areas where the US economy is performing well, but also made reference to the headwinds which have been gathering force since the beginning of the year. Speculation as to what impact the slowdown in China and stock market rout are likely to have on the Fed’s timeline for increasing interest rates saw the US Dollar put on a mixed performance, with the asset plummeting by over 1.2% against the safe-haven Yen.
Better-than-expected US initial jobless and continuing claims figures left the AUD/USD currency pair trending a little below 0.71. Saturday’s US University of Michigan Consumer Confidence Index and the nation’s Advance Retail Sales report are likely to be the next cause of ‘Greenback’ movement.
Canadian Dollar
As oil prices returned to an almost 12-year low the Canadian Dollar slipped against its Australian rival. Canada’s New Housing Price Index for December also disappointed expectations slightly by printing at 0.1% on the month rather than the 0.2% expected.
With no Canadian data to be aware of before the weekend, market sentiment and oil prices will dictate CAD Movement.
New Zealand Dollar
Although New Zealand’s Performance of Manufacturing Index climbed further above the 50 line separating growth from contraction in January (advancing to 57.9) the result failed to stop NZD fluctuating in the wake of Yellen’s testimony.
As markets digested the statement during the European session, the ‘Kiwi’ stabilised against the US Dollar and ‘Aussie’, gained on the Pound but fell against a bullish Euro.
Data Released
Feb 12th 02:00 US Fed’s Yellen Address to Senate Banking Committee
Feb 12th 11:30 AUS Home Loans (DEC)
Feb 12th 18:00 EUR German CPI (F) (JAN)
Feb 12th 20:30 UK Construction Output (YoY) (DEC)
Feb 12th 21:00 EUR Eurozone Gross Domestic Product (4Q)