Australian Dollar
Slowing Chinese trade figures heightened fears that a trade war with the US was on the horizon. Exports were down -6.1% on the year in December, compared to forecasts of -3.8%, while the trade surplus fell to US$40.82 billion instead of rising from US$44.61 billion to US$47.55 billion. China’s trade surplus with the United States declined for the first time since 2011. Slowing trade between the two nations would have a strong knock-on effect for other nations that trade with China, like Australia. This caused the Australian Dollar to slump on Friday.
Australian employment and joblessness data is set for release on Thursday.
Sterling
The Australian Dollar to Pound Sterling exchange rate ticked lower by around -0.2% during Friday’s session, although the Pound itself was weak against most other peers. There was no domestic data to provide support and a speech by Bank of England (BoE) official Michael Saunders contained mixed messages. On a positive note, Saunders claimed unemployment may not rise in line with forecasts made by the BoE. However, he also claimed that the strength of the labour market wouldn’t translate into accelerated wage growth.
UK consumer prices will be released on Tuesday; another strong rise in the pace of inflation will likely unsettle investors, who fear a squeeze on vital consumer spending as wages struggle to keep pace.
Euro
The Euro was largely making strong advances on Friday. Investors were still cheered by the news the European Central Bank (ECB) had not unanimously agreed to extend quantitative easing until December. This suggested that the ECB was not as dovish on the whole as first appeared. Additionally German wholesale prices saw a strong rise in December, accelerating from 0.1% to 1.2% month-on-month and from 0.8% to 2.8% year-on-year. Businesses are likely to pass on some of their rising costs to consumers, pushing up inflation.
The European Central Bank meets to discuss monetary policy on Thursday. Investors may be hoping for further signs that the Governing Council is against additional quantitative easing.
US Dollar
The US Dollar was rebounding from its recent lows on Friday after Donald Trump’s eventful press conference earlier in the week. Data wasn’t overly positive, but corrective trade kept the ‘Greenback’ on the ascent. Advance retail sales, expected to rise to 0.7%, fell just short of forecasts at 0.6%. Meanwhile the University of Michigan consumer confidence index for January registered a preliminary score of 98.1; a move against forecasts, even if only by ten basis points.
US consumer price index figures for December will be published early on Thursday morning.
Canadian Dollar
A wobble on the crude oil markets failed to undermine the Canadian Dollar on Friday, despite a lack of domestic data to distract from commodity developments. News that two potential hurdles for the Canada-EU free trade agreement, known as the Comprehensive Economic and Trade Agreement (CETA), had been cleared kept the ‘Loonie’ on the rise. Both Germany’s top court and the EU Parliament’s environment, public health and food safety committee approved the deal, with the latter recommending to Parliament that it votes in favour of CETA.
The Bank of Canada makes its next rate decision on Thursday, but with no change expected until the middle of next year at the earliest, investors may be more interested in Saturday’s early-morning consumer price index figures.
New Zealand Dollar
The New Zealand Dollar was also undermined by China’s latest trade figures. Even a forecast from ASB Bank, that the New Zealand economy would grow by 3.5% in 2017, failed to support the ‘Kiwi’. According to the bank, a rise in construction, household spending and tourism would boost inflation from record lows. The bank noted that political developments overseas could cast a shadow over growth.
The next global dairy auction takes place on Tuesday, so the ‘Kiwi’ is likely to see significant volatility once the winning prices have been announced.
Data Released
January 17th NZD Dairy Auction Whole Milk Powder MT (JAN 17)
January 17th 20.30 GBP Consumer Price Index (YoY) (DEC) 1.4%
January 19th 00.30 USD Consumer Price Index (YoY) (DEC) 2.1%
January 19th 11.30 AUD Employment Change (DEC) -5K
January 19th 23.45 EUR European Central Bank Rate Decision (JAN 19) 0.00%
January 21st 00.30 CAD Consumer Price Index (YoY) (DEC) 1.2%