Australian Dollar
After enjoying a bullish run for much of the week the Australian Dollar came crashing back to earth on Wednesday. The asset dipped against rivals like the US Dollar and Pound as Australian employment stats fell short of forecasts.
The nation was shown to have lost -7,900 positions in January rather than gaining the 13,000 expected, resulting in a surprise increase in the national unemployment rate to 6.0% from 5.8%.
Also weighing on the ‘Aussie’ was the news that the rate of inflation in China increased from 1.6% to 1.8%, a lower result than the 1.9% reading projected.
AUD/USD losses were limited however as the minutes from the last Federal Open Market Committee (FOMC) policy meeting upped the odds of the US leaving interest rates on hold for the foreseeable future. With Australian data lacking before the weekend, AUD movement is likely to be driven by news from the US and global risk sentiment.
Sterling
While lacklustre UK employment data left the Pound struggling on Wednesday, the British currency enjoyed a fairly impressive rebound on Thursday.
Hopes that UK Prime Minister David Cameron would be able to successfully renegotiate the terms of the nation’s EU membership gave Sterling a boost and sent the currency higher against the Australian Dollar, New Zealand Dollar, Euro and US Dollar.
If the current optimism fades the Pound could drop back once more, but if Cameron’s confidence proves well founded the AUD/GBP exchange rate could move away from its recent multi-month highs.
Today’s UK retail sales and public borrowing data is also likely to inspire some movement in the Australian Dollar to Pound Sterling exchange rate.
Euro
With the minutes from the last European Central Bank (ECB) policy meeting indicating that fiscal policy needs to be reviewed in order to compensate for current economic headwinds, the Euro put on a mixed performance on Thursday.
The minutes stated:
‘The point was made that, in a situation where risks were predominantly on the downside and new downside risks were emerging, it would be preferable to act pre-emptively, taking emerging risks into account, rather than to wait after risks had fully materialised.’
Although the Euro registered a significant decline against the Pound, the European asset was left trending in a fairly narrow range against the also struggling ‘Aussie’.
German Producer Prices are due to be published later today and may prompt a final flurry of EUR movement.
US Dollar
A dovish set of meeting minutes from the Federal Reserve lessened the US Dollar’s appeal during the North American session and the ‘Greenback’ came under further pressure due to commentary from Fed official James Bullard.
Bullard asserted that given current domestic and global conditions, it would be ‘unwise’ for the Federal Reserve to continue hiking interest rates at the current juncture.
Although the US Dollar managed to retain the upper hand against the ‘Aussie’ as a result of disappointing Australian labour data, its performance against peers like the Pound was less impressive.
If the weekend’s US inflation data shows the solid increase in consumer price gains forecast by economists, the US Dollar could firm before local markets reopen on Monday.
Canadian Dollar
While the Canadian Dollar weakened against a broadly strengthening Pound on Thursday, the commodity-driven currency extended recent gains against a number of its other rivals. The ‘Loonie’ was buoyed as oil prices rose on the news that Iraq intends to continue with supply talks.
Canadian Wholesale Sales also advanced by 2.0% on the month in December, a much more impressive increase than the 0.2% rise projected.
On Saturday Canada will be releasing its retail sales figures for December and inflation data for January. Both reports have the potential to initiate CAD movement.
New Zealand Dollar
Another disappointing economic report for New Zealand kept the ‘Kiwi’ on the back foot as the end of the week approached.
The nation’s ANZ consumer confidence index fell from 121.4 in January to 119.7 in February. The -1.4% slide in sentiment weighed on the New Zealand Dollar, with the currency’s losses being exacerbated by a general risk-off environment.
Data Released
Feb 19th 18:00 EUR German Producer Prices (JAN)
Feb 19th 20:30 UK Retail Sales (JAN)
Feb 19th 18:00 UK Public Finances