Australian Dollar
Stock market chaos and Federal Reserve interest rate hike bets were the main cause of Australian Dollar movement last week, with the South Pacific currency fluctuating in response to dramatic shifts in sentiment.
Although investors spent much of the week pulling away from higher-risk assets, losses against the US Dollar were limited due to US interest rate hike expectations taking a battering.
Before the weekend, better-than-forecast US retail sales data drove AUD/USD below 0.71 cents but an unexpected decline in consumer confidence meant any hopes for a March rate adjustment from the FOMC were fleeting.
Australian data took a back seat to global conditions last week but there are a couple of high-impact publications with the potential to spark AUD movement in the days ahead, like the minutes from the last Reserve Bank of Australia (RBA) policy meeting and Australia’s employment stats for January. China’s trade and inflation numbers will also have an impact on Australian Dollar demand.
Sterling
With global growth concerns and a dovish Bank of England (BoE) driving UK interest rate hike expectations back to 2020, the Pound had a largely dismal week of trading. Although a risk-off trading environment limited GBP losses against currencies like the Australian Dollar and New Zealand Dollar, the Pound struggled against the US Dollar and dropped to a 13-month low against the Euro.
However, before the weekend the Pound was boosted by a moderate increase in UK construction output. This week could prove to be pivotal for Sterling with the UK set to publish its inflation report for January. With the BoE’s Monetary Policy Committee (MPC) currently united in its belief that borrowing costs should remain on hold for the foreseeable future, it would take a notable turn around in British data for rate hike predictions to improve. A sturdy increase in consumer price gains would be Pound-positive while stagnant or falling inflation would drag the British currency lower. Other influential UK reports to watch out for this week include the nation’s employment stats for December.
Euro
As investors piled into safe-haven assets the Euro broadly rallied, with the AUD/EUR exchange rate dropping to a low of 0.6179 last week before recovering some ground as growth in the Eurozone was shown to have slowed on the year in the fourth quarter.
If risk appetite remains weak over the next couple of days the Euro is likely to retain the upper hand against the Australian Dollar. However, with speculation mounting surrounding potential action from the European Central Bank (ECB) in March, negative reports from the currency bloc could dent the Euro’s appeal over the next couple of weeks.
Of the stats set for publication over the next couple of days the most impactful include the Eurozone ZEW economic sentiment surveys, a speech to be given by the ECB’s Mario Draghi in Brussels and the central bank’s account of its last monetary policy meeting.
US Dollar
It had been hoped that the recent US Non-Farm Payrolls report might encourage the Federal Reserve to increase interest rates at its March gathering. Although the US was shown to have added fewer positions than forecast, the decline in the unemployment rate and increase in average earnings were generally considered bullish signals.
However, Fed Chairwoman Janet Yellen but the kibosh on expectations for a hike taking place in Q1 when she highlighted that global economic headwinds are likely to have a negative impact on the domestic outlook. With some investors now asserting that a rate cut is as likely to take place in 2016 as a hike, the US Dollar struggled against most of its currency peers in spite of general risk aversion.
While the ‘Greenback’ did firm slightly as US retail sales printed at 0.2% in Jan rather than the 0.1% forecast, a dip in the University of Michigan Confidence Index from 92 to 90.7 limited USD gains and kept the AUD/USD exchange rate trading around the 0.70 level. With the FOMC set to publish the minutes from its last policy meeting and US inflation data due for release on the 20th, marked US Dollar movement could be on the cards.
Canadian Dollar
Fluctuating oil prices kept the Canadian Dollar on its toes last week but Canadian data could have more of an impact on market movement over the next few days. The AUD/CAD exchange rate approached the weekend little changed from Monday’s opening levels but if Canadian inflation is shown to have climbed in January it could give the ‘Loonie’ a boost.
New Zealand Dollar
Dairy price concerns, pessimistic trading conditions and continued speculation regarding the likelihood of the Reserve Bank of New Zealand (RBNZ) cutting interest rates before the close of the year left the New Zealand Dollar struggling. The AUD/NZD exchange rate racked up a 0.7% gain on Friday and could extend gains if Tuesday’s dairy auction reveals another drop in the value of New Zealand’s key commodity.
Data Released
Feb 15th CNY Trade Balance
Feb 16th NZD Dairy Auction
Feb 16th 11:30 AUD RBA Feb Meeting Minutes
Feb 16th 20:30 UK Consumer Price Index (JAN)
Feb 16th 21:00 EUR Eurozone ZEW Economic Sentiment Survey
Feb 17th 10:30 AUD Westpac Leading Index
Feb 17th 20:30 UK Employment Change 3M/3M
Feb 17th 20:30 UK Average Weekly Earnings