Australian Dollar
A sharp dip in the Australian construction PMI weighed heavily on AUD exchange rates at the start of the week. Investors were not impressed to find that the index had retreated from 57.5 to 52.8 in December, signalling a marked loss of momentum on the month. While the sector nevertheless remained in a state of expansion this was not enough to prevent the Australian Dollar slumping. With the appeal of the US Dollar picking back up in the wake of hawkish Fed comments the mood towards the ‘Aussie’ deteriorated further.
AUD exchange rates could extend their downtrend further today if building approvals are shown to have slowed in November.
Sterling
Reaction to Theresa May’s much-anticipated cabinet reshuffle proved rather muted overnight, with none of the major posts changing hands. The mood towards the Pound remained generally bearish, though, as the Halifax house price data showed a surprise contraction on the month. With Halifax also forecasting that the housing market will weaken further over the course of 2018 this naturally weighed on GBP exchange rates.
Further signs of weakening consumer spending in this morning’s BRC like-for-like sales data may put additional downside pressure on the Pound.
Euro
While the latest raft of Eurozone confidence measures and retail sales figures proved positive this failed to keep the Euro on a stronger footing on Monday. This softening was largely due to the recovery of USD exchange rates, forcing the single currency to cede back some of its recent gains. Even as Eurozone data continues to impress the odds of any imminent action from the European Central Bank (ECB) remain slim, keeping something of a lid on the Euro.
Even so, if the German trade surplus widens as forecast the mood towards the single currency could improve in the short term.
US Dollar
Commentary from San Francisco Fed President John Williams helped to buoy the US Dollar, reversing some of last week’s losses. As Williams maintained the opinion that three interest rates will be appropriate over the course of 2018 this encouraged bets that the Federal Reserve could pursue a more aggressive pace of monetary tightening. Although opinion amongst Fed policymakers remains divided at this juncture the hawkish note was enough to set USD exchange rates on a fresh uptrend.
Any uptick in the NFBI small business optimism index could see the US Dollar extending its gains further overnight, even though a degree of political jitters remain.
Canadian Dollar
Although the odds of an imminent Bank of Canada (BOC) interest rate hike were boosted as a result of Friday’s better-than-expected unemployment data CAD exchange rates struggled to maintain their momentum. With market risk appetite generally declining in response to a stronger US Dollar investors were encouraged to sell out of the Canadian Dollar once again.
A rallying point could be in store for CAD exchange rates, however, if December’s housing starts figure shows an improvement on the month.
New Zealand Dollar
After last week’s softness the New Zealand Dollar was able to regain some ground, even in the continued absence of any fresh domestic data. While demand for higher-yielding currencies generally declined on Monday this failed to prevent an NZD rally, with investors taking advantage of the currency’s recent lows. This allowed the ‘Kiwi’ to trend sharply higher across the board overnight, even though its strength remains rather fragile.
If market risk appetite continues to deteriorate today, though, the gains of NZD exchange rates could prove short-lived.
Data Released
January 9th 10:01 GBP BRC Like-For-Like Sales (YoY) (DEC) 0.3%
January 9th 10:30 AUD Building Approvals (YoY) (NOV) 5.0%
January 9th 17:00 EUR German Trade Balance (NOV) 21.2 billion
January 9th 20:00 EUR Eurozone Unemployment Rate (NOV) 8.7%
January 9th 21:00 USD NFIB Small Business Optimism (DEC) 108
January 9th 23:15 CAD Housing Starts (DEC)