Australian Dollar
While the Reserve Bank of Australia’s (RBA) December meeting minutes showed cautious optimism going forwards, news that a record number of bonds would be issued this year by the Treasury unsettled investors and kept the Australian Dollar mixed. The increase in the budget deficit forecast yesterday, combined with the number of already issued bonds approaching maturity, has forced the government to issue AU$100 billion in new debt. Considering ratings agencies are already concerned by the level of government debt, this move could take Australia closer to losing its prized AAA credit rating.
The only Australian data set for release today is the low-impact Westpac leading index and the skilled vacancies growth data.
Sterling
AUD/GBP exchange rates were able to advance into positive territory yesterday thanks to a slump in Pound Sterling. Strong retail data from the Confederation of British Industry (CBI) failed to boost Pound sentiment, despite the total reported sales index rising from 34 to 42 and the retailing reported sales jumping from 26 to 35 against forecasts of a decline to 20. Brexit is too firmly on the minds of investors; analysts have often warned that things would get worse in 2017, despite strong data since the referendum. With the New Year just around the corner, investors are bracing for the worst.
Public sector borrowing data for November is expected to show that the deficit near-trebled to 11.6 billion, which is likely to significantly weaken the Pound.
Euro
The Euro was on mixed form yesterday, with investors awaiting the latest news regarding the Greek bailout and the Italian banking sector. There was hope for Greece as Eurogroup creditors met to discuss the reimplementation of debt relief. Meanwhile, in Italy, the government prepared a €20 billion rescue package for the stricken banking system, showing it was ready to act should Monte dei Paschi’s cash call to private investors fail. Eurozone producer price and current account data performed better-than-expected, but news of the tragic terrorist attack on a Berlin Christmas market unsettled the markets.
US Dollar
With no US data on the calendar, investors were looking more long-term when adjusting their USD positions. This made the US Dollar a highly appealing asset thanks to the combination of anticipated inflation from Trump’s intended stimulus spending and the higher US monetary policy this was likely to bring. As a result, the ‘Greenback’ was making strong gains.
US MBA mortgage applications figures are set for release later tonight.
Canadian Dollar
Positive data and a forecast decline in US oil stockpiles boosted the Canadian Dollar yesterday. Wholesale sales grew 1.1% month-on-month in October, against predictions of 0.5%. Meanwhile, crude was at a one-week high thanks to expectations US oil stocks would decline strongly, which may indicate that the global oversupply is beginning to lessen.
New Zealand Dollar
A small decline in dairy prices as a result of the latest global auction undermined the New Zealand Dollar yesterday. The -0.5% decline was the first fall since the beginning of October. While dairy prices have increased noticeably in recent months, the industry still remains fragile and investors won’t welcome any signs that the latest uptrend wasn’t part of a more stable recovery.
The New Zealand Dollar could receive a boost from today’s trade balance data, which is expected to show the trade deficit narrowed in November from -846m to -500m.
Data Released
December 21st 08.45 NZD Trade Balance (New Zealand dollars) (NOV) -500m
December 21st 10.30 AUD Westpac Leading Index (MoM) (NOV)
December 21st 20.30 GBP Public Sector Net Borrowing (Pounds) (NOV) 11.6b
December 21st 23.00 USD MBA Mortgage Applications (DEC 16)