Australian Dollar
Domestic data yesterday was largely positive, but a dovish 2017 forecast for Australia from Credit Suisse weakened the ‘Aussie’. According to the bank, the Australian economy is unlikely to see much of a pick-up in the final quarter of 2016 from the -0.5% contraction seen in Q3. Most alarmingly, Credit Suisse expects the Reserve Bank of Australia (RBA) to cut rates three times over the course of the year, taking the Official Cash Rate (OCR) below 1%.
The latest monetary policy decisions from the Reserve Bank of Australia are to be announced this afternoon.
Sterling
AUD/GBP weakened yesterday despite a near-comprehensive slump from the Pound. Investors were alarmed by the results of numerous business surveys on the topic of Brexit. From organisations including the British Chambers of Commerce (BCC) and Ipsos Mori, the polls revealed that over half of businesses are planning to raise their prices in the coming months and that over half of business leaders already feel the Brexit vote has hurt their companies. This weakened Sterling, but the poor outlook for Australian monetary policy made the ‘Aussie’ the more undesirable asset.
Like-for-like retail sales figures are set for release this morning.
Euro
Germany saw a surge in factory orders during December, with month-on-month forecasts of 0.7% being smashed by expansion of 5.2%. The year-on-year result was just as impressive, clocking in at 8.1% against predictions of 4.2%. The Euro slumped, however. This was largely the work of European Central Bank (ECB) President Mario Draghi, who reiterated that loose monetary policy was necessary to keep the Eurozone recovery on track. The fact the Eurozone retail PMI fell -0.3 to 50.1 – a mere eleven basis points away from contraction territory – further unsettled the markets.
German industrial production figures for December are set for release today.
US Dollar
Despite growing resistance to President Donald Trump’s so-called ‘Muslim ban’, the US Dollar was largely strengthening yesterday. The furore surrounding the ban on immigrants and refugees from seven predominantly-Muslim countries in Africa and the Middle East continues to build. Most recently, a Federal judge ruled that the ban was illegal and has suspended it nationwide. The White House is launching a legal challenge, but will have to defend itself in another; hundreds of major corporations, including Apple, Google, Facebook and Netflix, have launched a joint legal challenge against the ban. This may actually boost the US Dollar, as experts largely agree that curbing immigration would significantly damage the US economy.
The Federal Reserve’s Patrick Harker is due to give a speech tomorrow morning. It is unlikely he will talk about monetary policy, but investors will still be watching in the hope that he does.
Canadian Dollar
There was no Canadian data released yesterday, and the strength of the US Dollar was pressuring the value of crude oil lower. The Canadian Dollar was largely on the decline, stuck in limbo as investors await more news regarding Trump’s intentions towards cross-border trade. Economists had previously estimated that tariffs on Canadian goods could cut the value of the country’s exports to the US by -9%. Until the markets get a clearer indication of what the new Canadian-US trade relationship is going to be, there is a big cloud of uncertainty in the middle of Canada’s economic outlook.
Given the current focus on trade, the early-morning Canadian international merchandise trade figures for December will be of interest tomorrow.
New Zealand Dollar
Expectations surrounding a monetary policy meeting from the Reserve Bank of New Zealand (RBNZ) later this week are currently supporting the New Zealand Dollar. The ‘Kiwi’ advanced against most of its major peers yesterday thanks to hopes the RBNZ may even abandon its easing bias as a result of the latest meeting.
Today sees the announcement of the latest Global Dairy Trade auction results.
Data Released
February 7th 08.30 USD Fed’s Harker Speaks About Payment Systems in San Diego
February 7th 11.01 GBP BRC Sales Like-For-Like (YoY) (JAN) 0.9%
February 7th 14.30 AUD Reserve Bank of Australia Rate Decision (FEB 07) 1.5%
February 7th 18.00 EUR German Industrial Production n.s.a. and w.d.a. (YoY) (DEC) 0.3%
February 7th 23.00 NZD Dairy Auction Avg. Winning Price MT (FEB 07)
February 8th 00.30 CAD International Merchandise Trade (Canadian dollar) (DEC) CA$0.35b