Australian Dollar
During the local session the Australian Dollar consolidated earlier gains against the US Dollar and Pound Sterling as the minutes from the Reserve Bank of Australia’s (RBA) last policy gathering proved comparatively upbeat.
Although the RBA is paying close attention to global market conditions, it did highlight that consumer spending and house building are being supported by the bank’s accommodative fiscal policy. While a future rate cut was alluded to, the fact that the RBA seems in no hurry to slash rates at present was seen as AUD positive.
The Australian Dollar did go on to trim its advance against the US Dollar but the AUD/GBP currency pair remained bullish. Australia’s Westpac Leading Index could give the ‘Aussie’ another boost if it shows month-on-month improvement in January.
Sterling
Sterling’s stronger start to the week wasn’t destined to last and the British currency spiralled lower against the Euro, US Dollar and Australian Dollar over the course of the European session.
Demand for the Pound fell as the UK’s core inflation rate fell by more-than-expected. Although non-core inflation climbed to its highest level for over a year, the 0.3% result was still a far cry from the Bank of England’s 2% target. A combination of pared BoE rate hike expectations, EU referendum concerns and renewed demand for safer assets conspired to drive the AUD/GBP exchange rate to a high of 0.4988. The ‘Aussie’ may push higher against the Pound today as the UK publishes its latest employment figures.
Although the UK’s unemployment rate is believed to have fallen to 5.0%, the expected slide in average earnings (both including and excluding wages) is liable to have a negative impact on BoE rate bets and subsequently push Sterling lower.
Euro
ZEW economic sentiment surveys for Germany and the Eurozone might have revealed a marked slide in confidence but the results were ever-so-slightly better than forecast. The Euro was also able to recover some of the ground lost after European Central Bank (ECB) President Mario Draghi inferred that the central bank is prepared to expand its use of quantitative easing in order to support the Eurozone.
With the OPEC’s production deal failing to live up to expectations, the appeal of safer assets increased, giving the Euro a boost. The EUR/AUD exchange rate came away from highs of 1.57 before the close of European trading but still remained up on the day.
The next Eurozone data scheduled for release is the region’s construction output figures for December. A sturdy result would be Euro-positive.
US Dollar
The US Dollar got off to a slow start to the week with local markets closed for a national holiday, but the ‘Greenback’ made up for it on Tuesday.
As well as climbing by 1% against a broadly softening Pound, the US Dollar firmed by 0.7% against the ‘Aussie’, 0.5% against the Canadian Dollar and 1.5% against the New Zealand Dollar.
The US Dollar benefited from oil prices retracing their steps as the OPEC announced it would be freezing production at January’s historically high levels rather than reducing it.
USD held gains despite the Empire Manufacturing index coming in at -16.64 in February rather than the -10.00 level anticipated.
If today’s US housing data and industrial/manufacturing production reports print well the AUD/USD exchange rate could edge back below 0.71 cents.
Canadian Dollar
As the OPEC decision effectively capped how much oil prices are likely to recover by, the Canadian Dollar experienced a pretty rocky trading session on Tuesday. There was some good domestic news for Canada however, with the nation’s Manufacturing Shipments coming in at 1.2% rather than the 0.5% forecast and Existing Home Sales increasing by 0.5% month-on-month in January.
Although the Canadian Dollar did fall against its US rival, it managed to retain the upper hand against the ‘Aussie’, with the AUD/CAD pairing holding in the region of 1.0140.
New Zealand Dollar
The New Zealand Dollar experienced a dismal day of trading on Tuesday as the Reserve Bank of New Zealand (RBNZ) negatively revised its inflation expectation for the first quarter. Falling dairy prices dragged the New Zealand Dollar lower still and took the NZD/USD pairing below the 0.66 level while the NZD/AUD exchange rate briefly dropped to 0.91.
Now that the bulk of the week’s influential economic news for New Zealand has been released, the New Zealand Dollar is likely to fluctuate in response to global sentiment and commodity price shifts.
Data Released
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
Feb 17th 21:00 EUR Eurozone Construction Output
Feb 17th 23:00 US Mortgage Applications (FEB 12)