Australian Dollar
Positive domestic and overseas data boosted the Australian Dollar yesterday. Although consumer confidence edged lower to 116.4, the NAB business conditions index rose from 11 to 16 and the business confidence index from 6 to 10. Meanwhile, Chinese consumer price index data showed that inflation strengthened even further than expected. Inflation rose from 2.1% to 2.5% – ten basis points above forecast. Surging price growth suggests consumers are spending more, which will have driven up demand for Australian imports in January.
February’s Westpac consumer confidence index is set for release today.
Sterling
UK inflation data disappointed yesterday, allowing AUD/GBP to advance around 1%. The consumer price index still posted strong growth, rising from 1.6% to 1.8% year-on-year, but this was ten basis points worse than expected. Core price growth also held steady at 1.6% rather than climbing to 1.8%. This softened the odds of the Bank of England (BoE) being forced to hike interest rates in the near term. Analysts forecast that the Monetary Policy Committee (MPC) may even be able to delay hiking interest rates until 2018.
Investors will pay close attention to today’s average weekly earnings figures. With wage growth stagnating and consumer prices posting strong growth – but seemingly not strong enough for the BoE to act to curb it – household spending could be squeezed, which may negatively impact the services sector.
Euro
The Euro was on mixed form yesterday after a slew of disappointing GDP results. German growth figures for the final quarter of the year printed at 0.4% in the month and 1.7% on the year; ten basis points below forecast in this instance. Eurozone-wide growth performed similarly, clocking in at 0.4% on the quarter and 1.7% on the year, against predictions of 0.5% and 1.8% respectively. Business confidence figures also slumped, yet the Euro managed to hold onto gains against many of its peers – just not the Australian Dollar.
The meeting of G20 Finance Ministers is likely to cause some jitters amongst investors tomorrow.
US Dollar
The US Dollar was on mixed form yesterday despite several hawkish signs from the Federal Reserve. Jeffrey Lacker, Richmond Fed President, commented that he believes rates need to increase at a faster pace than markets have currently priced-in. Janet Yellen, appearing before the Senate Banking Panel, sounded hawkish as well, warning that there were risks to waiting too long to tighten policy. However, she also stated that the potential for changes in fiscal stimulus could unsettle the current economic outlook, which may give the Fed pause for thought before hiking rates.
Janet Yellen will be in the news again tomorrow as she is due to testify before the House Panel.
Canadian Dollar
Signs that Donald Trump was less bothered about rewriting the Canadian-US trade relationship than he was the one with Mexico boosted the Canadian Dollar yesterday. After meeting with Canadian Prime Minister Justin Trudeau at the White House, Trump stated that the US-Canada trade relationship was ‘very outstanding’ and would only require ‘tweaking’. These comments suggest that Canada’s goal of distancing itself from Mexico – the real target of Trump’s ire – seems to have worked in protecting the domestic economy from hugely disruptive tariffs.
January existing home sales data is set for release early tomorrow morning.
New Zealand Dollar
The New Zealand Dollar slumped yesterday as investors looking for risk bought into the more appealing Australian or Canadian Dollars. Domestic data was mixed, with house sales falling -14.7% on the year in January while food prices rose 2.8%. But there were better signs for the ‘Aussie’ and the ‘Loonie’ and so the ‘Kiwi’ was largely ignored.
Data Released
February 15th 10.30 AUD Westpac Consumer Confidence (FEB)
February 15th 20.30 GBP Average Weekly Earnings (3M/YoY) (DEC) 2.8%
February 16th EUR G20 Finance Ministers Meeting
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