Australian Dollar
In the latter-half of last week, the Australian Dollar softened versus a number of its major peers in response to a gloomy outlook for private capital expenditure. The headline CAPEX figure for the fourth-quarter printed positively at 0.8%, but underlying trends suggest that momentum is slowing significantly. This highlights the arduous process of moving away from a mining-based economy.
On Saturday the ‘Aussie’ extended losses after comments from an ANZ official weighed heavily on investor confidence. Richard Yetsenga, global head of financial markets research at ANZ, stated that the Australian Dollar is as much as 10% overvalued. US Dollar strength also weighed on demand for the South Pacific asset.
Looking ahead, market focus will be dominated by Tuesday’s Reserve Bank of Australia (RBA) policy meeting. According to analysts at Rabobank the ‘Aussie’ resilience and overvaluation can be linked to speculation that the domestic economy is sufficiently robust for the RBA to avoid easing monetary policy. Somewhat ironically, however, the resultant AUD strength has increased the chances of some form of stimulus measures employed by the central bank.
Tuesday will also see the Manufacturing and Non-Manufacturing PMIs for China published. This will be likely to influence AUD movement as a weak showing in China’s manufacturing output suggests continued damp demand for Australian exports.
Following Tuesday’s RBA policy decision, Wednesday’s fourth-quarter Gross Domestic Product data will be very likely to cause ‘Aussie’ volatility.
Sterling
Pound Sterling weakness was the dominant theme last week as EU referendum concerns significantly dampened demand for the British asset. However, the Pound managed to avoid further depreciation in the latter-half of the week; positing moderate daily gains on Friday and Saturday, although still holding a comparatively weak trade weighting.
The Sterling appreciation was mostly the result of consolidation trading with investors taking advantage of attractive buying opportunities. Even Saturday’s dismal domestic data, which showed British Consumer Confidence slumped beyond expectations, wasn’t enough to offset GBP appreciation, albeit fractional.
Influential British economic data is somewhat thin-on-the ground this week, although Thursday’s UK Services PMI may cause volatility. This is because the services sector accounts for the single greatest portion of British Gross Domestic Product. However, domestic data may not be particularly impactful with political uncertainty continuing to dominate trader focus.
Euro
Bucking recent trends, the Euro struggled last week amid mounting speculation that the European Central Bank (ECB) will be forced into significantly easing policy in March. This was due to particularly disappointing inflation data.
Thursday’s Eurozone Consumer Price Index failed to meet with expectations and the previous figure was downwardly revised. In addition, Saturday’s preliminary figure for German Consumer Prices dropped beyond the median market forecast.
This week’s focus for those trading the Euro will be Monday’s Eurozone Consumer Prices for February. Should the data print poorly it will all but confirm massive policy easing from the European Central Bank. Tuesday’s German labour market data will also be of significance given that Germany is the most powerful economy in the 19-nation currency bloc.
US Dollar
Last week the US Dollar endured a mixed-faring as positive domestic data was somewhat offset by concerns that the Federal Reserve will delay a benchmark interest rate hike for some time to come.
Saturday saw significant USD appreciation, however, following a number of positive domestic ecostats. Fourth-quarter annualised Gross Domestic Product came in at 1.0%; bettering the median market forecast 0.4% growth. The fourth-quarter Gross Domestic Product Price Index also eclipsed expectations. Additionally, Core Personal Consumption Expenditure advanced by 1.7% which was significantly higher than the market consensus of 1.5%.
In terms of domestic data to look out for this coming week, Wednesday’s ISM Manufacturing report and Friday’s ISM Non-Manufacturing/Services Composite will be most significant. However, there is the potential that data will not be hugely impactful on the US Dollar as political uncertainty comes to the fore.
Canadian Dollar
Following a surprisingly optimistic Canadian growth forecast from the International Monetary Fund (IMF), the Canadian Dollar performed positively last week.
Aiding the ‘Loonie’ (CAD) uptrend was the price of crude oil which posted modest gains throughout the week amid hopes that oil producing nations will work together to enact a freeze on production.
There will be several high impact Canadian ecostats this week. Wednesday’s Gross Domestic Product for December will likely be the focus of trader attention. However, US Dollar positioning and the price of crude oil will be the most dominant factors regarding the provocation of Canadian Dollar volatility this coming week.
New Zealand Dollar
The New Zealand Dollar strengthened over the course of last week amid mounting hopes that the economy will see robust growth irrespective of falling dairy prices. This is because wage growth and unemployment have improved significantly.
On Saturday the New Zealand Dollar maintained a comparatively high trade weighting versus its major peers after domestic data showed the trade deficit narrowed beyond expectations. However, US Dollar strength limited the appeal of the high-yielding New Zealand Dollar.
The focus this coming week for those invested in the ‘Kiwi’ (NZD) will be Tuesday’s dairy auction. Further falls in dairy prices may cause traders to reconsider hopes that the Reserve Bank of New Zealand (RBNZ) will avoid cutting rates thanks to positive labour market conditions.
Data Released
Mar 1st 12:00 CNY Manufacturing PMI (FEB)
Mar 1st 14:30 AUD RBA Rate Decision 2.00%
Mar 2nd 02:00 USD ISM Manufacturing (FEB) 48.5
Mar 2nd 11:30 AUD Gross Domestic Product (YoY) (4Q)