Australian Dollar
The Australian Dollar was bullish on Friday due to the contents of the latest Reserve Bank of Australia (RBA) Statement on Monetary Policy. Although revising its growth forecasts for the coming three quarters lower, the RBA cheered investors by brushing off suggestions the Australian economy saw recession in the second half of 2016. While the contraction in the third quarter was worse-than-expected at -0.5%, the RBA claimed almost all the causes were temporary, such as weak building work due to poor weather. The bank also revised its inflation forecast higher, bringing consumer price growth closer to the middle of its target range.
Key Australian labour market data is set for release on Thursday.
Sterling
AUD/GBP exchange rates soared on Friday, despite impressive December data from the UK that had analysts suggesting that fourth quarter GDP might even have to be revised up to 0.7%. The various trade deficits each narrowed by over £1 billion more than forecast. Industrial production clocked in at 4.3% on the year – 1.1% above expectations – while manufacturing production printed at 4%, which was well over double what was projected. However, the Pound slumped. Thursday had seen traders buying into Sterling because safe-haven assets like the Euro and US Dollar were faring badly on political uncertainty. Traders who wanted somewhere safe to park their capital were left with the Pound as one of the least risky options. But with the US Dollar recovering again, investors were moving their money back to the more promising ‘Greenback’.
UK inflation data is set for release tomorrow. Although the recently-hawkish Kristin Forbes is soon stepping down from the Monetary Policy Committee (MPC), a strong result here will boost hopes that more UK policymakers will feel the need to tighten policy.
Euro
Despite positive noises coming from the urgent negotiations surrounding the Greek debt crisis, the Euro slumped on Friday as investors waited for more concrete news. Eurogroup officials suggested that the extreme views of German Finance Minister Wolfgang Schauble – that Greece may have to leave the Eurozone if it wants debt relief – were not held by the majority of Eurogroup members. Additionally, the EU commissioner in charge of financial stability, financial services and capital markets union commented that it was not strictly necessary for the International Monetary Fund (IMF) to participate in the next bailout. Valdis Dombrovskis noted that it was only ‘preferable’ that parties outside of the European Stability Mechanism (ISM) and European Central Bank (ECB) are involved in the bailout. This could break the deadlock between Eurogroup and the IMF by simply cutting the latter out of the process entirely.
Eurozone GDP figures due out tomorrow could help take the sting out of the Greek debt crisis complications, should they print positively.
US Dollar
The US Dollar slumped against the Australian Dollar and Canadian Dollar on Friday, but made strong advances elsewhere. After signs that USD investors had run out of patience waiting for President Donald Trump to begin implementing stimulus measures, the President commented in a meeting with airline executives that he would soon reveal details of ‘phenomenal’ tax cut plans. Although not very specific, investors were relieved by signs fiscal stimulus was still on the President’s agenda. However, the ‘Greenback’s advance was dented after an above-forecast fall in the University of Michigan consumer confidence index from 98.5 to 95.7. A score of 97.8 had been predicted.
Investors will be paying close attention to Thursday’s speech by Federal Reserve Chair Janet Yellen.
Canadian Dollar
Drastically above-forecast labour market data sent the Canadian Dollar on a bullish advance. Employment was expected to decline by -5,000 in January, but instead swelled by 48,300, thanks to a 32,400 person increase in those holding part time jobs. This was due to a surprise increase in the participation rate, which inched up to 65.9, pushing the unemployment rate down to 6.8% against expectations. Crude oil was also rocketing higher, with WTI up 1.8% and Brent up 1.9%.
There is no tier-one Canadian data set for release this week. Thursday will see the release of existing home sales data.
New Zealand Dollar
The New Zealand Dollar advanced against safer assets on Friday, but lost out against its commodity peers. No New Zealand data was released, but the latest Chinese trade data made for rosy reading. Imports grew at a significantly faster pace than exports, registering an impressive 16.7% – a more than fivefold increase on December’s pace and well over one-and-a-half times the forecast. This suggested that demand for goods from New Zealand – a key trade partner – remains strong.
There is no headline New Zealand data due out in the coming week, but tomorrow’s Chinese consumer price index figures will likely have a strong impact upon the ‘Kiwi’.
Data Released
February 14th 12.30 CNY Consumer Price Index (YoY) (JAN) 2.4%
February 14th 20.30 GBP Consumer Price Index (YoY) (JAN) 1.8%
February 14th 21.00 EUR Eurozone Gross Domestic Product s.a. (YoY) (4Q P) 1.8%
February 16th 01.00 CAD Existing Home Sales (MoM) (JAN)
February 16th 02.00 USD Fed Chair Yellen Delivers Semi-Annual Testimony to House Panel
February 16th 11.30 AUD Employment Change (JAN) 13k