Australian Dollar
Investors were in a grim mood yesterday, with numerous headwinds weighing on currencies across the world. However, the Australian Dollar was still largely making gains versus its peers. A report by Deloitte Access is predicting that Australia’s current account deficit will vanish in the current year. Predicting export income will exceed the cost of imports for the longest period in nearly 50 years, Deloitte claims the current account will rise from a -4.5% deficit in the financial year just ended to a 1.3% surplus over 2017.
The NAB business confidence index will be amongst several pieces of Australian data released today.
Sterling
AUD/GBP traded around opening levels for much of yesterday’s session. There was little to support the Pound, with lacklustre Sterling largely responding to strength or weakness in other countries. Markets were unsettled by the growing political backlash against Donald Trump’s recent immigration ban on citizens and refugees from seven nations in Africa and the Middle East. Investors were worried Theresa May would not be able to walk the line between keeping her MPs, opposition parties and the general public happy without offending the notoriously sensitive US leader. With the UK counting on the US for a lucrative trade deal following Brexit, May cannot afford to make an enemy of Trump.
Investors will pay close attention to today’s GfK consumer confidence survey, which may suggest the trajectory for future consumer spending. Weakening confidence may slow spending, causing UK GDP growth to falter.
Euro
German inflation may have accelerated to the fastest pace in three-and-a-half years, but investors were not particularly pleased. The year-on-year figures fell short of expectations by ten basis points, while breaking down the data revealed that energy prices were by far the biggest source of price growth at 5.8% compared to a 3.2% increase in food prices. Prices for services inched lower. The fact that energy continued to fuel price growth made it likely that Mario Draghi would again claim underlying cost pressures were weak.
German unemployment and Eurozone consumer price index figures are set for release today.
US Dollar
The US Dollar undulated yesterday as investors began to consider the potential economic impact of Donald Trump’s more controversial Presidential promises. So far the markets have been anticipating the positive impact of his business-friendly decisions, such as talk of corporation tax cuts and the approval of two new oil pipelines. But fears over how his new ban on immigrants and refugees from Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen would impact businesses and trade relations softened the ‘Greenback’. Some strength returned to the US Dollar after personal consumption expenditure figures released very early this morning showed that spending remained at 1.7% – November’s figure was revised up from 1.6%.
US consumer confidence figures for January are set for release very early tomorrow morning.
Canadian Dollar
Concerns that an increase in US drilling activity would somewhat lessen the positive impact of OPEC’s recently-agreed oil production cut weighed on the crude markets. However, the Canadian Dollar was performing well, buoyed by the potential for Trump’s controversial ‘Muslim ban’ to boost the Canadian economy. Canadian officials and business leaders have already suggested Canada will accommodate those affected by the sudden change in US policy, with investors wondering if the strongly anti-immigrant attitude of the US could drive technology firms – who often rely on overseas talent – over the border.
Canada’s November gross domestic product figures will be released very early tomorrow morning.
New Zealand Dollar
A combination of thin Asian trading and Trump fears weighed on the New Zealand Dollar. However, the ‘Kiwi’ was still able to make gains versus many of its peers thanks to December trade statistics. Exports and imports both rose above forecast, with exports rising NZ$150 million above forecast. This meant that the trade balance saw a deficit of -NZ$41 million; under half the shortfall expected.
Net migration figures for December are set for release this morning.
Data Released
January 31st 08.45 NZD Net Migration SA (DEC)
January 31st 11.01 GBP GfK Consumer Confidence Survey (JAN) -8
January 31st 11.30 AUD NAB Business Confidence (DEC) 4.9
January 31st 21.00 EUR Eurozone Consumer Price Index Estimate (YoY) (JAN) 1.4%
February 1st 00.30 CAD Gross Domestic Product (YoY) (NOV) 0.3%
February 1st 02.00 USD Consumer Confidence (JAN) 112.9