Australian Dollar
The Australian Dollar was largely weak yesterday, after Treasurer Scott Morrison warned that opposition parties needed to stop blocking government plans to cut corporation tax. According to the Treasurer, without plans to cut company tax rates to 25%, Australia is at risk of losing its competitiveness on the global market. His warning comes after the nation has risen into the top five OECD nations in terms of tax levels, while falling to 22nd place in competitiveness rankings.
Only low-impact Australian data is set for release today. The ‘Aussie’ could get a boost if producer prices are shown to have risen in the fourth quarter, as this suggests consumers could soon see rising prices as well.
Sterling
AUD/GBP losses yesterday were curbed by the release of the latest UK GDP figures. Data for the fourth quarter of 2016 showed that growth remained in line with the third quarter, despite forecasts of a ten basis point slowdown on the quarter and the year. While this showed that the Brexit vote had no impact upon economic growth, investors were not cheered. The data showed that, once again, the services sector was entirely responsible for driving the UK economy. Considering recent data has suggested consumer spending is weakening, many believe the impact of the vote to leave the EU won’t truly be felt for a few months.
Euro
Appetite for the Euro was sapped by a strengthening US Dollar yesterday. Fresh concerns over the Greek bailout continued weighing on the common currency, while a slight rise in German consumer confidence failed to undo the damage from yesterday’s weakening business expectations survey. Additionally, even though it ticked lower, at over 18% Spanish unemployment remained a serious issue. Italian retail sales improved above forecast on the year, but unexpectedly declined by -0.7% on the month. Growth of 0.1% had been predicted.
The Eurozone M3 money supply is set for release today. This reports on the amount of currency in circulation, including bank deposits, bonds and shares. An increasing money supply weakens the purchasing power of the Euro, strengthening inflation; a good sign for investors.
US Dollar
It seems investors were finally deciding yesterday that Donald Trump would indeed implement the fiscal stimulus measures in the short-term that he promised during his campaign. Despite signing-off on the Mexican border wall and threatening to cancel a meeting to renegotiate NAFTA should Mexico continue to refuse to pay for its construction, investors were of the view that the new President had indeed taken a strongly pro-business stance with his early policies. Trump’s focus remained on bringing jobs and companies back to the US, boosting the ‘Greenback’ again as investors once more started thinking about the potential inflation boost of his plans.
Fourth-quarter US GDP figures are set for release very early on Saturday morning. The ‘Greenback’ could see strong depreciation given the extent of the slowdown forecast.
Canadian Dollar
The Canadian Dollar was boosted yesterday by news that an internal free-trade deal between Canada’s provinces would be signed in ‘a matter of weeks’. The new rules would come in to force on July 1st – the 150th anniversary of the nation. This deal is particularly important as the effects of the Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU could come into effect during this year. The signing of the internal deal will remove barriers between provinces and make it easier for businesses to operate.
New Zealand Dollar
Investors spent much of yesterday selling the New Zealand Dollar, but not because of any negative developments. The latest inflation data showed an even stronger-than-expected surge in inflation in the fourth quarter of the year. Quarter-on-quarter consumer prices rose 0.4%, against predictions of a hold at 0.3%, while year-on-year consumer prices leapt from 0.4% to 1.3% – ten basis points above forecast.
Data Released
January 27th 11.30 AUD Producer Price Index (YoY) (4Q) 0.6%
January 27th 20.00 EUR Eurozone M3 s.a. (YoY) (DEC) 4.9%
January 28th 00.30 USD Gross Domestic Product (Annualized) (4Q A) 2.2%