Australian Dollar
The Australian Dollar was able to end the day trending bullishly on Friday thanks to weak US data. Commodity prices were still soft, with the Bloomberg Commodity Index down around -0.6%, but investors were chasing high-yield currencies. Australian data was positive, showing the strongest rate of export price growth since 2010 at 12.4% in the final quarter of 2016. This as good as guarantees that the next trade balance data, for December, will show a continued surplus after rising out of deficit for the first time in three years during November.
That trade balance data will be due on Thursday and investors are likely to be excited ahead of the release, given that it is highly likely to reveal a continued surplus.
Sterling
AUD/GBP was able to rack up strong gains on Friday, helped by the miserable state of the Pound. Investors were back to positioning themselves short on the UK currency due to a lack of data, the big Brexit speech and court judgements being in the past and a general focus on the official beginning of the UK’s EU divorce in March. Investors were also on tenterhooks ahead of a meeting between Theresa May and Donald Trump, in which traders wanted to see talk of trade deals, but which threatened to be overshadowed by human rights issues and Trump’s anti-globalisation agenda.
There is another Bank of England (BoE) ‘Super Thursday’ this week, with the latest monetary policy decisions accompanied by the next Inflation Report.
Euro
US Dollar weakness and positive Eurozone data helped support the Euro on Friday. The Eurozone M3 money supply grew faster-than-expected, climbing ten points above forecast to hit 5%. This means that the amount of Euros, as well as Euro denominated assets such as stocks, in circulation or deposited in banks is increasing sharply. The more Euros there are in circulation, the more likely the common currency is to weaken and stoke inflationary pressures. This improves the outlook for Eurozone monetary policy.
Tuesday sees the release of German and Eurozone consumer price figures. Despite Mario Draghi’s recent dovishness, investors are still likely to react positively if the data shows accelerating price growth.
US Dollar
GDP figures out early on Saturday morning disappointed investors, who had already been expecting a severe slowdown anyway. A drop from 3.5% to 2.2% had been expected and would likely have still been met with positivity as the Q3 surge was caused by a shortage of soybeans in South Africa and the forecast 2.2% still represented a strong expansion. However, the actual figure of 1.9% was below average for the past two years. The other key data, durable goods orders, also disappointed, showing an upwardly-revised decline in the previous month and a surprise -0.4% contraction in December.
The Federal Reserve will announce its latest policy decisions on Thursday.
Canadian Dollar
The Canadian Dollar and the crude oil markets slumped in tandem on Friday, despite the weakness in the US economy. Commerzbank analysts had warned that the oil markets were becoming increasingly resilient to bad news, focussing instead only on the positives. This blinkered trading, they claimed, was what was keeping oil prices above the key level of US$50 per barrel.
Canadian gross domestic product figures for November are set for release on Wednesday.
New Zealand Dollar
With the Canadian Dollar out of the running, the New Zealand Dollar had less competition as a high-yield asset and was fully enjoying the appetite generated by market risk-demand. Additionally, New Zealand’s trade minister Todd McClay claimed there was still value in the Trans-Pacific Partnership (TPP) despite the withdrawal of the US.
New Zealand labour market data for the fourth quarter of 2016 is set for release on Wednesday.
Data Released
January 31st 21.00 EUR Eurozone Consumer Price Index Estimate (YoY) (JAN)
February 1st 00.30 CAD Gross Domestic Product (YoY) (NOV)
February 1st 08.45 NZD Employment Change (YoY) (4Q)
February 2nd 06.00 USD Federal Open Market Committee Rate Decision (FEB 01) 0.75%
February 2nd 11.30 AUD Trade Balance (Australian dollar) (DEC)
February 2nd 23.00 GBP Bank of England Inflation Report