Australian Dollar
A reversal in iron ore losses, mixed US labour market data and sturdy ecostats from China combined to give the Australian Dollar a little lift before the weekend, with AUD advancing on the US Dollar and Euro during Friday’s European session.
In the week ahead Australia’s AiG Performance of Services/Construction indexes, current account data and GDP figures could all inspire ‘Aussie’ shifts. However, the week’s main event will be the RBA interest rate decision. Dovish projections from the central bank would weigh heavily on demand for the South Pacific currency. China’s Trade Balance and CPI reports may prove equally influential. With a full economic calendar ahead, expect notable Australian Dollar volatility.
Sterling
Last week the AUD GBP exchange rate dropped in response to comments from Brexit Secretary David Davis. With the government official intimating that the UK could pay to retain access to the European Union’s single market post-Brexit, sentiment towards the Pound improved and the currency broadly rallied.
However, the Supreme Court is due to meet this week to pass judgement on the Government/Parliament debate regarding the activation of Article 50. Any indications that PM Theresa May will be able to pull the trigger without the ratification of Parliament is likely to send the Pound reeling. The UK’s Services PMI will also be of interest but is unlikely to spark significant GBP movement unless it deviates significantly from forecasts.
Euro
For much of last week concerns relating to the Italian referendum saw the Euro pressured lower against the majority of its currency counterparts. While political concerns will continue having an impact on EUR demand, investors will also be looking ahead to this week’s European Central Bank (ECB) interest rate decision.
If the ECB announces a six-month extension to quantitative easing, which some analysts believe to be likely, widespread Euro losses are forecast to occur. As long as an RBA rate cut doesn’t precede this event, the AUD EUR exchange rate could be in line to record significant gains.
US Dollar
While the hotly-anticipated US Non-Farm Payrolls data was mixed – the US economy added fewer positions than forecast in November and average earnings fell, but the unemployment rate dipped – the odds of the Federal Reserve increasing interest rates at its upcoming meeting remained high.
Subsequently, US Dollar losses following the report were limited, although AUD USD did advance by 0.4% on the news. Controversial commentary from President Elect Donald Trump was also responsible for the lacklustre performance in USD. However, as it would take a serious economic shock to deter the Fed from raising borrowing costs in a couple of weeks’ time, the US Dollar is likely to put on a sturdy performance next week irrespective of US data.
Canadian Dollar
The OPEC decision to cut output pushed oil prices above $50 a barrel last week and pushed the Canadian Dollar broadly higher. However, AUD CAD was able to recoup some of those losses before the weekend despite Canadian unemployment figures surprising to the upside. In terms of Canadian news to be aware of next week, the Bank of Canada (BoC) interest rate decision is liable to inspire the most CAD movement, though a neutral stance from the institution would have a limited impact.
Other Canadian news to focus on includes the Ivey Purchasing Managers Index for November and Housing Price/Building Permits figures.
New Zealand Dollar
With so much high profile news from China, Australia and Europe on the cards next week, New Zealand’s few ecostats might not have much of an impact. That being said, the latest Dairy Price Auction will be influential, with an increase in the price of New Zealand’s key commodity potentially boosting NZD exchange rates.
Data Released
December 5th 09:30 AUD AiG Performance of Service Index (NOV)
December 5th 12:45 CNY Caixin China PMI Services (NOV)
December 5th 20.30 GBP Markit/CIPS UK Services PMI (NOV)
December 5th 20:30 GBP Markit/CIPS UK Composite PMI (NOV)