Australian Dollar
Dovish new budget forecasts from the Australian government caused the Australian Dollar to largely slump yesterday. A report suggested that a sluggish rise in wages and company profits would contribute to a widening of the public deficit by over -AU$10 billion by 2020; just one year before the government has vowed to balance public finances.
The Reserve Bank of Australia (RBA) will release the minutes from this month’s policy meeting later today.
Sterling
Low liquidity in the market was not helping the Pound yesterday, allowing the Australian Dollar to make some rare gains. A lack of data left investors focussing on the general outlook for 2017 and on Wednesday’s borrowing figures, which are forecast to show a significant widening of the deficit. This could greatly increase the amount by which Chancellor Philip Hammond is likely to overshoot annual borrowing targets by; experts are already predicting a borrowing overshoot of around £10 billion.
CBI retail data is set for release tonight and is expected to show the reported sales index dropped from 26 to 20.
Euro
The Euro was mixed yesterday, with US Dollar strength partially countering the uplifting effect of positive domestic data. German Ifo business climate and current assessment scores rose above forecast, hitting 111.0 and 116.6 respectively, while the expectations measure inched up to 105.6 as predicted. In a positive move for inflationary prospects, labour cost growth within the currency bloc accelerated to 1.5% in the third quarter; an increase of half a percent. News that Italian bank Monte dei Paschi was having trouble securing agreement from an investor who promised to buy €1.5 billion worth of shares in the struggling bank unsettled traders.
German data today is expected to show that the decline in producer price growth halved to -0.2%, which would be a positive, albeit it minute, step towards building inflationary pressures within the Eurozone’s largest economy.
US Dollar
The US Dollar was able to post strong advances yesterday, even after the latest Markit PMIs worsened. The preliminary services index dropped from 54.6 to 53.4, despite predictions of a rise to 55.2. The composite index fell over -1 point, from 54.9 to 53.7. However, despite the weakening, the indices still suggested growth in the final quarter of the year would clock in around a respectable 2%.
Canadian Dollar
The Canadian Dollar was outperforming the Australian Dollar and Pound Sterling, but weakening versus the other majors yesterday. Crude oil was trending flatly, with earlier gains disappearing as the US Dollar strengthened throughout the North American session. There was no domestic data and positive New Zealand data meant the Canadian Dollar’s appeal as a commodity-correlated asset was being sapped by more attractive competition.
Data released early tomorrow morning is expected to show an increase in wholesale sales during October.
New Zealand Dollar
Strong domestic data kept the New Zealand Dollar advancing in places, although its appeal was dented overall by low market demand for high-risk assets. The Westpac consumer confidence index rose from 108 to 113.1, the performance of services index climbed to 57.9 from 56.6 and the number of building permits issued in October was 2.6% higher than in September. Additionally, the ANZ activity outlook and NBNZ business confidence indices also improved.
The New Zealand Dollar could see marked volatility on the latest Global Dairy Trade auction results today.
Data Released
December 20th NZD Dairy Auction Avg. Winning Price MT (DEC 20)
December 20th 11.30 AUD RBA Dec. Meeting Minutes
December 20th 18.00 EUR German Producer Prices (YoY) (NOV) -0.2%
December 20th 22.00 GBP CBI Retailing Reported Sales (DEC) 20
December 21st 00.30 CAD Wholesale Sales (MoM) (OCT) 0.6%