Australian Dollar
The Australian Dollar managed to advance on Friday even though the US Dollar was on bullish form. Domestic data started off the day well, with the number of home loans approved falling by slightly less than forecast. Chinese inflation data also printed positively, with the consumer price index showing above-forecast inflation of 2.3% and a strong 3.3% rise in producer prices. This improved the outlook for Australian exporters, as rising prices suggest increasing demand for goods and services.
Australian unemployment data is set for release on Thursday.
Sterling
A marked narrowing of the UK trade deficit in October failed to prevent AUD/GBP exchange rates from entering negative territory, although the ‘Aussie’ gains were reduced to just above opening levels. The previous month’s shortfalls were all revised lower and October’s figures all printed significantly below forecast. The visible trade balance was meant to fall from -£13.8 billion to -£11.8 billion, but instead dropped to -£9.7 billion, while the total trade deficit narrowed to -£1.5 billion; around half the level of shortfall expected.
The Bank of England is set to make its last policy decision of the year on Thursday. Markets are expecting no change, but will be interested to see if there are any adjustments to the long-term policy outlook, particularly in the wake of Friday’s positive trade data.
Euro
The Euro was still weakened by the latest developments from the European Central Bank (ECB), but data and Italian news undermined the common currency even further. The German trade balance and current account both declined significantly more-than-forecast, while exports grew just 0.5% against predictions of 0.9% growth. Further cooling Euro appetite was the news that the ECB was preparing to deny failing Italian bank Monte dei Paschi additional time to raise the capital required to deal with its latest round of bad loans.
The Eurozone ZEW survey results for December are set for release on Tuesday.
US Dollar
A surge in US consumer confidence on Friday gave the US Dollar an additional boost, with the ‘Greenback’ still advancing thanks to the ECB news weakening the Euro. The University of Michigan consumer confidence index had been forecast to tick higher from 93.8 to 94.5, but instead leapt up to 98.0. This pushed Federal Reserve rate hike bets up even higher, with markets pricing in odds of 97.2% that the Federal Open Market Committee (FOMC) will raise borrowing costs.
The much-awaited FOMC monetary policy meeting takes place on Thursday. Markets are expecting a rate hike of 0.25%.
Canadian Dollar
The ‘Loonie’ was advancing on oil market developments on Friday, despite the strength of the US Dollar. A rising ‘Greenback’ makes cross-border trade more expensive and less lucrative for Canadian businesses, weakening the outlook for the Canadian current account. However, crude oil was on the rise, strengthening to new multi-month highs, so the ‘Loonie’ advanced.
Friday sees the Bank of Canada (BOC) releasing its latest Financial System Review.
New Zealand Dollar
A combination of poor domestic data and US Dollar strength weakened the New Zealand Dollar on Friday. Card spending figures disappointed, with spending on retail unexpectedly declining -0.1% and overall spending falling -0.3% on the month in November. October’s card spending growth figure was also revised lower to 0.5%.
There is no tier-one New Zealand data set for release this week, but the Business NZ performance of manufacturing index for November will be released on Thursday.
Data Released
December 13th 20.30 GBP Consumer Price Index (YoY) (NOV)
December 13th 21.00 EUR Eurozone ZEW Survey (Economic Sentiment) (DEC)
December 15th 06.00 USD Federal Open Market Committee Rate Decision (DEC 14) 0.75%
December 15th 08.30 NZD Business NZ Performance of Manufacturing Index (NOV)
December 15th 11.30 AUD Employment Change (NOV)
December 16th 02.30 CAD BOC releases Financial System Review, Poloz press conference