Australian Dollar
Australian data was mixed yesterday, but the Australian Dollar was firmly on the decline against the majority of its peers. In positive news, the latest current account figures showed the smallest deficit since 2001. This has fuelled speculation that the government will post its first current account surplus since the mid-1970s. Private sector credit data was disappointing, however, with growth slowing on the month in January to 0.2% instead of 0.5% and unexpectedly edging down to 5.4% from 5.6% on the year.
Australia’s gross domestic product figures for the final quarter of 2016 could create some headwinds or tailwinds for the ‘Aussie’ today.
Sterling
Despite its weakness elsewhere the Australian Dollar to Pound Sterling exchange rate was able to edge above opening levels yesterday. Sterling continued to be weakened by Brexit fears, in part due to the fact that the GfK consumer confidence survey for February showed household sentiment weakening. The decline in the index from -5 to -6 was expected, but investors are already skittish over the outlook for the UK economy after recent poor inflation, wage and retail data, so another sign the UK’s consumer-driven output could be under threat was not well received. Additionally, demand for the Pound was softened by the news an amendment to the Brexit bill that would have seen Theresa May forced to keep the UK in the single market after Brexit was defeated.
The Markit UK manufacturing PMI is set for release today.
Euro
The Euro was able to record only soft gains against the majority of its peers. Domestic data was thin on the ground, although French GDP was unexpectedly revised higher in the second round of estimates for 2016 Q4 to 1.2%. Inflation data was softer-than-expected, however, keeping the outlook on Eurozone monetary policy weak. Focus on the impending speech from US President Donald Trump, as well as a survey showing over a quarter of investors now expect at least one country to leave the Eurozone, weighed on Euro demand.
German employment data is set for release today.
US Dollar
President Donald Trump is due to make his first address to Congress later today. Uncertainty over whether Trump will reveal details of his plans to stimulate the economy kept the US Dollar soft yesterday. Traders were unwilling to place bets on the ‘Greenback’ until they knew more about the economic outlook for the US. If Trump were to confirm his stimulus plans, the US Dollar would rocket; if he avoids the subject, the ‘Buck’ will likely plummet, so investors were considering USD too risky to buy into. Additionally, domestic data was poor, with annualised fourth-quarter GDP figures for 2016 remaining at 1.9% despite forecasts of a rise to 2.1%.
President Trump will deliver his much-anticipated speech to congress this afternoon. Should he avoid mentioning fiscal stimulus, the US Dollar will likely plummet.
Canadian Dollar
The Canadian Dollar weakened yesterday, with investors waiting to see what Donald Trump would say, if anything, about trade during his speech to Congress today. Indications that he wants a substantial change to NAFTA would harm the outlook for the Canadian economy, so investors were selling out of the ‘Loonie’ in favour of something more stable. Domestic data didn’t provide much in the way of optimism; industrial product prices in January undershot forecasts by ten basis points and the raw materials price index, while not falling as far as expected, dropped from 6.5% to 1.7%.
New Zealand Dollar
The New Zealand Dollar managed to rebound after being sold off on a run of poor domestic data. The trade balance deficit unexpectedly swelled to -285 million; more than tenfold on forecasts after December’s -36 million shortfall. The ANZ activity outlook and business confidence indices both weakened and the money supply held steady, leaving the outlook on inflation rather underwhelming. But, with the US Dollar weakening, investors were still drawn to the high-yield ‘Kiwi’, helping it to quickly reverse gains.
The New Zealand Dollar is more likely to be influenced by the vital Chinese manufacturing PMI than by low-impact domestic data today.
Data Released
March 1st 11.30 AUD Gross Domestic Product (YoY) (4Q) 1.9%
March 1st 12.00 CNY Manufacturing PMI (FEB) 51.2
March 1st 13.00 USD President Trump Addresses Joint Congress
March 1st 19.55 EUR German Unemployment Change (FEB) -10k
March 1st 20.30 GBP Markit UK PMI Manufacturing SA (FEB) 55.7