Australian Dollar
While Australia’s historically poor wage cost index sent the Australian Dollar trending lower on Thursday, the South Pacific currency staged a rebound as the end of the week approached.
The ‘Aussie’ was bolstered by both domestic and external news, with Australian Private Capital Expenditure rising 0.8% in Q4 2015 (vs. forecasts for a decline of -3.0%) and a prominent Federal Reserve official talking down US rate hike bets.
The capital expenditure data lent the ‘Aussie’ support by indicating that the local economy is moving away from traditionally mining-led growth and focusing more on the services and export sectors in response to global headwinds.
Meanwhile, the Fed’s James Bullard weakened the US Dollar and bolstered demand for higher-risk assets by indicating that the Federal Open Market Committee would be foolish to consider tightening fiscal policy given current market uncertainty.
The AUD/USD exchange rate remained above 0.72 even as the US Durable Goods Orders report exceeded expectations. AUD/GBP bullishness also persisted as ‘Brexit’ bets continued dictating Sterling movement. Domestic data is lacking before the weekend, but next week’s Reserve Bank of Australia (RBA) interest rate decision could spark AUD volatility.
Sterling
The Pound’s dismal week didn’t improve on Thursday, with the British currency deriving little support from the week’s main UK release – Q4 GDP data.
The growth report confirmed quarterly expansion of 0.5% and annual growth of 1.9%. While it was something of a relief that the data hadn’t been negatively adjusted, the result wasn’t encouraging enough to counteract the impact of ‘Brexit’ speculation.
With EU referendum fears becoming entrenched, today’s UK GfK Consumer Confidence report isn’t expected to come to the Pound’s aid (particularly with a dip in sentiment forecast) so the AUD/GBP exchange rate could close out the week trading in the region of a 9-month high.
Euro
As Thursday’s Eurozone inflation data increased the odds of the European Central Bank (ECB) expanding stimulus in March the AUD/EUR exchange rate was able to push to a high of 0.6553. The Eurozone’s annual consumer price index for January was revised to 0.3% from an initial estimate of 0.4%. December’s figure was also cut to 0.2%.
We may see the Euro edge lower against the Australian Dollar before markets close for the weekend if upcoming ecostats for the currency bloc (particularly French Q4 GDP and German CPI) fall short of forecasts. Gauges of economic, business, industrial and services confidence for the Eurozone are also expected to weaken.
US Dollar
With Federal Reserve official James Bullard indicating that the central bank is unlikely to consider raising borrowing costs until the global economy stabilises, rate hike bets dipped and demand for the US Dollar eased.
As the prospect of the US adopting lower interest rates for longer is supportive of higher risk assets, the Australian Dollar was able to firm against its North American peer. US data released in the early hours of Friday morning had little impact on USD trading. Although Durable Goods Orders rose by 2.0% more than expected in January, the number of people applying for first time unemployment benefits came in higher than projected.
Several high profile US reports are scheduled for publication over the weekend, including the nation’s trade, growth, personal consumption and consumer confidence numbers. Any disappointing results could push AUD/USD higher.
Canadian Dollar
A surprisingly optimistic Canadian growth forecast from the International Monetary Fund (IMF) gave the Canadian Dollar a boost on Thursday, with the commodity-driven currency advancing by more than 0.5% against the ‘Aussie’ and the majority of its other main peers.
As Canada’s economic calendar is looking a little fuller next week, with Current Account, GDP and Manufacturing figures scheduled for release, CAD may be less subject to the influences of market sentiment and commodity price shifts.
New Zealand Dollar
With the Fed’s latest interest rate-related remarks increasing the appeal of higher-risk assets, the New Zealand Dollar was able to strengthen across the board ahead of the release of domestic trade data.
As economists have forecast a widening in New Zealand’s trade deficit the NZD exchange rate may soften as we head into the weekend. Japan’s upcoming inflation data for January may also have an impact on risk-appetite.
Data Releases
Feb 26th 08:45 NZD Trade Balance (JAN)
Feb 26th 10:30 JPY National Consumer Price Index 0.0%
Feb 26th 11:05 GBP GfK Consumer Confidence Survey 3
Feb 26th 18:45 EUR French GDP (Q4) (YoY) 1.3%
Feb 26th 21:00 EUR Eurozone Economic Confidence (FEB)