Australian Dollar
Strong iron ore prices boosted the Australian Dollar yesterday, with the commodity rising towards US$100 per tonne and hitting its best levels since the middle of 2014. The rise came despite warnings from Reserve Bank of Australia (RBA) Governor Philip Lowe that Australian household debt was a threat to the economy. Lowe claimed that record high debt levels could soon see consumers ‘sharply’ cutting back on consumption, which would hurt the economy. This high level of household debt makes it difficult for the RBA to hike interest rates, as this would further increase the financial burden for indebted Australians.
Private capital expenditure figures for the fourth quarter of 2016 will show whether business investment continued to decline as the year drew to a close.
Sterling
Yesterday’s second round of estimates for UK 2016 Q4 GDP allowed the Australian Dollar to Pound Sterling exchange rate to climb. Quarter-on-quarter growth was actually revised up again, clocking in at 0.7%, but investors were worried by other parts of the data. The year-on-year figure was cut down to 2% from 2.2% and figures showed that business investment had experienced a -1% fall. With the report still showing that strong consumer activity was vital for UK economic growth, recent poor inflation, wage and sales data continued to weigh on investors’ minds.
Considering investors are keeping a close eye on the retail sector as concerns build over the outlook for consumer spending, today’s CBI retailing reported sales data could cause some jitters for AUD/GBP.
Euro
Fears over the potential outcome of the French Presidential elections dragged the Euro lower yesterday. Investors, still bruised from the surprise outcomes of the Brexit referendum and US elections last year, were withdrawing from the Euro yesterday. The first round of voting doesn’t take place until late April, but markets were clearly in no mood to get burned for a third time. The Euro showed its increasing political correlation by ignoring positive German business sentiment scores from Ifo. Consumer price index data didn’t make for particularly pleasant reading, showing a -0.8% contraction on the month in January as forecast. Finalised year-on-year core and non-core figures held steady at 0.9% and 1.8% respectively, offering no surprises.
German consumer confidence figures will be among the numerous reports released covering the Eurozone’s powerhouse economy.
US Dollar
Investors were awaiting this morning’s release of the Federal Open Market Committee (FOMC) meeting minutes yesterday. Anticipation that the minutes, released before the start of today’s session, would show that the Federal Reserve was growing more hawkish with regards to monetary policy normalisation boosted demand for the US Dollar. Even suggestions from the Fed’s John Williams that the current global low interest rate environment would likely persist for some time failed to curb hike bets or investor enthusiasm for the ‘Greenback’.
US initial and continuing jobless claims data is due very early tomorrow morning.
Canadian Dollar
Poor retail sales figures and mixed oil markets largely weakened the Canadian Dollar yesterday. Sales in December were expected to stagnate month-on-month, after growing 0.3% in November. Instead, transaction volume declined half a percent. Excluding autos, sales declined -0.3% against predictions of 0.5% growth. November’s figure was revised to show sales had actually declined -0.1%.
New Zealand Dollar
The New Zealand Dollar was on mixed form yesterday, enjoying some strong rises despite focus on the US Dollar, weakness in the commodity markets and underwhelming domestic data. Credit card spending grew just 0.2% month-on-month in January after a 3.2% rise in December, while year-on-year card spending climbed 7.1% – down -1.5% on December’s level. Given this comes straight after the Christmas period, this slowdown was hardly a surprise to investors.
Data Released
February 23rd 11.30 AUD Private Capital Expenditure (4Q) -0.5%
February 23rd 18.00 EUR German GfK Consumer Confidence Survey (MAR) 10.1
February 23rd 22.00 GBP CBI Retailing Reported Sales (FEB) 5
February 24th 00.30 USD Continuing Claims (FEB 11) 2065k