Australian Dollar
Continued strength in the iron ore market further supported the Australian Dollar yesterday, with prices remaining around their highest levels since October 2014. Data showed that exports from Port Hedland – Australia’s largest hub for iron ore exports by far – were on track to break December’s record 43.8 million tonnes. Domestic data was mildly supportive, with consumer confidence inching higher by 0.1% to 97.4, although after December’s -3.9% drop this could hardly be deemed a recovery.
Australian labour market data today could provide the Australian Dollar with fresh support; forecasts are for an increase in employment of 10,000.
Sterling
Strong UK data couldn’t prevent investors from taking profit on a bullish Sterling yesterday, causing the Australian Dollar to Pound Sterling exchange rate to rally. Jobless claims fell by -10,100 against forecasts for a rise of 5,000. Average weekly earnings both including and excluding bonuses rose above predictions, indicating that UK consumers may not be squeezed quite so tightly by accelerating inflation as initially thought. But the fresh strength of the Pound proved too tempting for investors and so GBP weakened as it was sold off.
The only UK data expected today is the RICS house price balance for December.
Euro
The Euro was decidedly mixed yesterday. Finalised inflation reports for December held steady on initial estimates, confirming that inflationary pressure within the currency bloc had strengthened considerably on the previous month. Almost all 19 of the Eurozone member states saw price growth in the final month of 2016. Even Greece and Cyprus, both amongst the hardest hit by the banking crisis, saw an end to long periods of deflation. Construction output stagnated on a year-on-year basis, however.
The European Central Bank (ECB) meets to discuss monetary policy today, but no changes are expected and many investors believe the Governing Council will continue to hold a dovish outlook, even once higher inflation is taken into account.
US Dollar
The US Dollar was largely advancing yesterday, although the strength of the iron ore markets kept the ‘Greenback’ on the decline versus the ‘Aussie’. Domestic data was positive overall, although this didn’t lend any support to USD; Trump’s recent comments about it being overvalued were still playing on the minds of investors. Industrial output rose to a two-year high in December, while core inflation saw the predicted uptick from 2.1% to 2.2% and non-core inflation jumped from 1.7% to 2.1%.
Investors will be interested to hear from the Federal Reserve Chair Janet Yellen today; she is due to speak in San Francisco shortly.
Canadian Dollar
The Canadian Dollar spent much of yesterday seesawing ahead of the afternoon’s monetary policy announcements from the Bank of Canada (BOC). The oil markets were showing strong declines on forecasts that US shale output would return to growth in February after a quarter in recession. Investors were worried US producers would move to fill the gap created by OPEC’s production cut, benefitting from oil prices while they were high but ironically contributing to them weakening again in the long-term.
New Zealand Dollar
The New Zealand Dollar was on mixed form yesterday, making some minor losses against several peers as the recent rally began to lose momentum. There was still strong appetite for commodities and the risky New Zealand Dollar, but the Australian Dollar was the high-yield unit of choice for investors, leaving the ‘Kiwi’ on the side-lines.
The Business NZ performance of manufacturing index for December will be one of the most high-profile of today’s New Zealand data releases.
Data Released
January 19th 07.00 USD Fed’s Yellen Speaks in San Francisco
January 19th 08.30 NZD Business NZ Performance of Manufacturing Index (DEC)
January 19th 11.01 GBP RICS House Price Balance (DEC) 30%
January 19th 11.30 AUD Employment Change (DEC) 10k
January 10th 15.45 EUR European Central Bank Rate Decision (JAN 19) 0.00%