Australian Dollar
A low-impact data slew yesterday was largely positive for the Australian Dollar, although there was nothing amongst the releases to generate any notable gains for the ‘Aussie’. While consumer confidence edged down by -0.8 points, investment lending saw an impressive rise of 4.9% in November; October’s was revised higher to 1.5%. Home loans also saw above-forecast growth, rising 0.9% instead of stagnating after last month’s positively-revised -0.6% fall.
The Westpac consumer confidence index is set for release this morning, with the result potentially altering the inflationary outlook for the Australian economy.
Sterling
AUD/GBP exchange rates collapsed yesterday following a speech on Brexit from UK Prime Minister Theresa May. The negative elements had already been fed to the markets over the past few days, so the Pound was pre-weakened ahead of the revelation that the government intends to quit the single market. But the Prime Minister stated that parliament would get a vote on the final Brexit deal, sending the Pound rocketing across the board. The latest inflation data showed an above-forecast pace of price growth, raising hopes the Bank of England (BoE) would hike rates in the near-term.
UK wage growth data could take the shine off the current GBP rally, as a sluggish figure here would remind investors that UK consumers are set to feel the squeeze from rising prices.
Euro
US Dollar strength pressured the Euro lower yesterday, with the low odds of any change in monetary policy stance from the upcoming European Central Bank (ECB) policy meeting also weighing on the common currency. Eurozone data was fairly mixed, although the German ZEW current situation index jumped from 63.5 to 77.3, against forecasts of 65.
Economic sentiment improved, but failed to rise to forecast levels, manging 16.6 instead of 18.4.
Finalised Eurozone consumer price figures aren’t forecast to change, but a deviation from initial estimates could create some Euro volatility.
US Dollar
Profit-taking drove the US Dollar lower yesterday. Investors had little reason to hold the ‘Greenback’, with no economic data on the calendar and nothing likely to influence the long-term policy outlook until after Donald Trump has been inaugurated. Fed hike bets remained strong, so the odds of positive data pushing them up much further remain low. The continued status quo therefore provided a good opportunity to profit on previous USD appreciation and so the flood of ‘Greenback’ onto the market lowered exchange rates across the board.
US consumer price data is due out very early tomorrow morning. CPI is not the preferred measure of inflation for the Fed and, with hike bets strong already, there is a chance the headline data may actually have little impact on the US Dollar.
Canadian Dollar
The Canadian Dollar was largely weak yesterday, slumping against a number of its major peers, despite a weakening US Dollar boosting crude oil prices. Further news emerged regarding Finance Minister Bill Morneau’s plans to combat economic shocks caused by the Trump Presidency. According to government sources, this would likely take the form of reinstating a recently-abandoned ‘cushion’ in the budget – at the cost of increasing the deficit.
The Bank of Canada (BOC) meets to set monetary policy early tomorrow morning. Economists don’t expect any change in the long-term, so there may be little from this meeting that alters the Canadian Dollar’s current trajectory.
New Zealand Dollar
The New Zealand Dollar was largely bullish yesterday, supported by a weak US Dollar and positive domestic news. The latest Global Dairy Trade auction yielded a 0.6% rise in dairy prices; not a huge recovery, but a welcome change after the -3.9% drop seen a fortnight ago. After a sharp recovery since the summer of 2016, it looks as though the recent declines could have been more of a blip than a return to a downtrend as some investors had feared.
Data
January 18th 10.30 AUD Westpac Consumer Confidence (JAN) -0.1%
January 18th 20.30 GBP Average Weekly Earnings 3M/(YoY) (NOV) 2.6%
January 18th 21.00 EUR Eurozone Consumer Price Index (YoY) (DEC F) 1.1%
January 19th 00.30 USD Consumer Price Index (YoY) (DEC) 2.1%
January 19th 02.00 CAD Bank of Canada Rate Decision (JAN 18) 0.50%