Australian Dollar
While Australian Dollar exchange rates were mixed yesterday, it was clear that the ‘Aussie’ was only strengthening against currencies facing significant headwinds. Investors were selling out of commodity-correlated assets after Friday’s Inauguration of Donald Trump as President of the United States. Trump failed to give any details of his fiscal stimulus policies, but his protectionist rhetoric was unmistakable. As a member of the Trans-Pacific Partnership (TPP), Australia could face economic headwinds should Trump withdraw from the deal, as pledged during the election campaign. This, combined with generally low risk-appetite, kept the Australian Dollar largely on the decline.
Consumer confidence data for the week ending January 22nd is set for release this morning.
Sterling
AUD/GBP collapsed yesterday, with investors buying into the Pound due to its comparative safeness as the US Dollar weakened following Trump’s Friday inauguration. With the Brexit vote several months ago and some clear indications of the government’s negotiating plans, the Pound was no-longer weighed down by huge levels of uncertainty. But for safe currencies like the US Dollar, the worst could still be to come, leaving the Pound as a surprisingly safe bet for investors. Additionally, Theresa May debuted her new industrial strategy for the UK, further demonstrating that the government does actually have a plan as Brexit approaches.
The Supreme Court is expected today to announce its verdict on December’s Article 50 court case. Upholding the ruling previously made by the High Court against the government would mean Theresa May would require Parliament to vote through a bill authorising her to invoke Article 50, which could boost the Pound due to the potential for MPs to amend such legislation.
Euro
The Euro was on mixed form yesterday, advancing against the Australian Dollar amongst others, but making significant losses versus other peers. On the one hand, US Dollar weakness was boosting the common currency. However, Trump fears were also weighing on the Euro, as the new US President has already demonstrated how anti-trade his administration will be by immediately signing an executive order on NAFTA. Should Eurozone trade, or the strength of the USD/EUR exchange rate, become his next target, the fragile Eurozone recovery could be derailed. Fears of this curbed enthusiasm for the Euro.
A slew of Eurozone PMIs is set for release today. The Eurozone composite index will give an indication of the overall health of the Eurozone economy.
US Dollar
The US Dollar slumped yesterday as investors reacted to Friday’s inauguration of President Donald Trump. There had been hopes that Trump would clarify his intentions regarding fiscal stimulus, perhaps giving dates and a timeline for the implementation of new strategies. However, the President did not mention the topic. Instead, the focus of his speech was fiercely protectionist, with Trump vowing to follow the mantra of ‘buy American and hire American’. This unsettled investors, who worried about the impact withdrawing from free-trade agreements could have on the US economy.
Canadian Dollar
News that Donald Trump was expected to sign an executive order to begin the renegotiation of the North America Free Trade Agreement (NAFTA) yesterday weakened the Canadian Dollar. The US is Canada’s top trading partner, so the potential for Donald Trump to levy tariffs on goods crossing the border has weakened the outlook of the economy. Additionally, continued fears that US oil producers were going to fill the gap created by OPEC’s joint production cut lowered crude oil prices, dragging the ‘Loonie’ lower.
New Zealand Dollar
Standard & Poor’s yesterday reaffirmed its ratings for the New Zealand Dollar, leaving the AA foreign currency and AA+ local currency ratings unchanged. The ratings agency also noted it holds a ‘stable’ outlook, with an improved outlook on the country’s net government debt and current account deficit. Additionally, fresh confidence data showed that sentiment towards the labour market was increasingly optimistic and confidence in employment had struck an eight-year high. This saw the New Zealand Dollar largely trend bullishly.
The New Zealand performance of services index is set for release this morning and could further boost the ‘Kiwi’ if it continues to register a strong performance.
Data Released
January 24th 08.30 NZD Performance Services Index (DEC)
January 24th 09.30 AUD ANZ Roy Morgan Weekly Consumer Confidence Index (JAN 22)
January 24th 20.00 EUR Markit Eurozone Composite PMI (JAN P) 54.5
January 24th 20.30 GBP UK Supreme Court Rules on Parliament’s Role in Brexit