Australian Dollar
The Australian Dollar was largely on the advance yesterday, supported by news of Chinese backing for a new mining project in Southern Australia. The region’s Eyre Peninsula is the target for a new mine, railroad and port that will help Australia meet the demand for cleaner iron ore. Worth AU$3.4 billion, the project is a huge step towards the government’s goal of attracting AU$10 billion in projects for stable iron ore by 2021. The completed mine is expected to produce 24 million metric tonnes of iron ore.
This month’s Reserve Bank of Australia (RBA) policy meeting minutes are set for release today.
Sterling
AUD/GBP slumped yesterday as the Pound was buoyed by hopes the House of Lords would be more effective at amending the Article 50 bill than the House of Commons was. The legislation to allow Prime Minister Theresa May to officially invoke the EU’s exit clause entered the first day of debates, with nearly 200 peers having requested to speak on the issue. MPs earlier gave May carte blanche to pursue the kind of Brexit she wanted, but the Lords are likely to pursue changes to the bill. This could curb the Prime Minister’s ability to push for a ‘Hard Brexit’ – a pleasing outcome for investors.
As well as public sector borrowing figures for January, the Pound is also likely to see volatility due to a speech delivered to Parliament by Bank of England (BoE) Governor Mark Carney.
Euro
The Euro was largely on strong form yesterday, although it weakened against the Pound and was flat against the US Dollar. Data was thin, with only German producer price figures on offer. These printed above forecast, improving the inflation outlook for the Eurozone’s powerhouse, but it was hopes that a solution to the Greek debt crisis would soon be found that boosted the Euro. German Finance Minister Wolfgang Schauble said that he believed creditors had found ‘common ground’.
A slew of Markit PMIs for Eurozone member states and the currency bloc as a whole are set for release today.
US Dollar
Federal Reserve member Loretta Mester commented that she would be ‘comfortable’ hiking interest rates, but the US Dollar was on mixed form yesterday. With markets already betting on two interest rate hikes in 2017, Mester’s hawkishness wasn’t enough to push markets into thinking three increases were on the table. The main issue remained that there was little evidence yet that Donald Trump would introduce the bold fiscal stimulus measures investors were hoping for. Traders want to see evidence of that before they begin betting on an even more hawkish outlook on Fed policy.
Several Markit PMIs are due for release today, including the composite, while Fed officials Kashkari and Williams are set to give speeches.
Canadian Dollar
Crude oil was on the rise and Canadian officials were sounding confident about the renegotiation of the North America Free Trade Agreement (NAFTA), yet the Canadian Dollar slumped yesterday. Investors were worried that the strength in the oil market may be transient, what with US oil stockpiles at record highs and an increase in drilling rigs. While the Organisation of the Petroleum Exporting Countries (OPEC) continues to effect its production cuts, there is growing worry that the gap in the market could be filled by US producers ramping up their output now that oil is profitable again.
New Zealand Dollar
The New Zealand Dollar was largely positive yesterday, supported by the strong outlook for the domestic economy. With the US Dollar restrained by a lack of evidence Trump will indeed increase fiscal stimulus, investors were looking at riskier currencies. The ‘Kiwi’ was also buoyed by the latest performance of services index, which rose from 58.4 to 59.5.
Data Released
February 21st 11.30 AUD RBA Feb. Meeting Minutes
February 21st 20.00 EUR Markit Eurozone Composite PMI (FEB P) 54.3
February 21st 20.30 GBP Public Sector Net Borrowing (Pounds) (JAN) £14.4b
February 21st 21.00 GBP BOE Governor Mark Carney Speaks in U.K. Parliament
February 22nd 01.45 USD Markit US Composite PMI (FEB P) 54