Australian Dollar
As the day progressed on Friday, investor focus honed in on the upcoming Presidential inauguration. This sapped demand for risk-correlated assets and the Australian Dollar slumped. Positive domestic and Chinese data failed to help, even though home sales in Australia grew 6.1% during December and Chinese GDP surprised to the upside with a reading of 6.8% for the fourth quarter. There was, as ever, some concern that the data released by Beijing may not be accurate, so investors were not overly influenced by the positive news.
Fourth-quarter Australian consumer price data is set for released on Wednesday.
Sterling
Disappointing retail sales undermined the Pound, slowing losses for the AUD/GBP exchange rate. Since the Brexit vote, consumer spending has remained strong, driving growth in the vital services sector. However, the data from December showed that sales volumes slumped -1.9% on the month instead of just -0.1%, while annual sales dropped from 5.7% to 4.3% instead of accelerating to 7.2%. Higher inflation was blamed for causing the fastest decline in sales in almost five years. This boded ill for the future; consumer prices are expected to continue rising, while wage growth remains sluggish, likely curbing household spending further still.
UK fourth-quarter GDP figures are set for release on Thursday.
Euro
The Euro fluctuated on Friday, with investors unsettled ahead of the day’s US events. Traders were hoping that Donald Trump would unleash strong fiscal stimulus measures that would boost inflation, forcing the Federal Reserve to hike rates. However, the Euro was able to push back against fears of divergence in monetary policy between the Fed and the European Central Bank (ECB). The common currency later strengthened, despite the morning’s ECB Survey of Professional Forecasters revealing expectations of sluggish inflation and loose monetary policy for some time to come.
Tuesday sees a slew of Eurozone PMIs released, including the composite index for the currency bloc.
US Dollar
The US Dollar trended softly on Friday, notching up minor losses against a number of its peers. Investors were waiting for Donald Trump’s first speech as US President, hoping that he would clarify his stance on fiscal stimulus. There have been suggestions he may spend up to US$1 trillion on boosting the economy with things like infrastructure projects, but investors would like to get some confirmation before they become any more bullish on the already-strong US Dollar.
Saturday sees the release of the fourth-quarter US GDP figures.
Canadian Dollar
The Canadian Dollar outperformed its commodity peers on Friday but otherwise weakened notably. The latest inflation data delivered another blow to investors hoping to see Canadian monetary policy tightened any time in the next few years. The recent warnings from Bank of Canada (BOC) Governor Stephen Poloz that a rate cut could be on the table this year were compounded by poor inflation data for December. The consumer price index was expected to accelerate from 1.2% to 1.7% but only reached 1.5%.
The coming week is incredibly sparse for Canadian data, with Tuesday’s wholesale sales figures for November one of only two releases scheduled for publication.
New Zealand Dollar
There was no New Zealand data on the economic calendar on Friday, leaving the ‘Kiwi’ vulnerable due to the lack of risk-appetite ahead of Donald Trump’s inauguration. The New Zealand Dollar therefore slumped, with the market’s reaction to the latest Chinese GDP data proving rather muted due to the US focus.
The New Zealand Dollar could receive a boost on Thursday if the fourth-quarter consumer price index shows an uptick in inflation, although the rate is currently at a sluggish 0.4%.
Data Released
January 24th 00.30 CAD Wholesale Sales (MoM) (NOV)
January 24th 20.00 EUR Markit Eurozone Composite PMI (JAN P) 54.1
January 25th 11.30 AUD Consumer Prices Index (YoY) (4Q) 1.5%
January 25th 08.45 NZD Consumer Prices Index (YoY) (4Q)
January 26th 20.30 GBP Gross Domestic Product (YoY) (4Q A) 2%
January 28th 00.30 USD Gross Domestic Product (Annualized) (4Q A) 2.1%