Chinese Growth Worries Limit Australian Dollar Appeal
Continued worries over the outlook of the Chinese economy put the Australian Dollar under pressure yesterday. With the world’s second largest economy still showing signs of slowing the mood towards the risk-sensitive Australian Dollar naturally soured. Coupled with news that the US government shutdown is at an end this left AUD exchange rates lacking in any particular support at the start of the week.
Demand for the Australian Dollar could diminish further this morning if the NAB business confidence index fails to show an improvement on the month.
Pound Softens in Anticipation of Brexit Debate
Confidence in the Pound deteriorated at the start of the week as market optimism over Brexit faded. As markets have already priced lower odds of a no-deal Brexit into GBP exchange rates there was limited potential for any fresh gains. An air of uncertainty continues to hang over the future of the UK economy, in spite of optimism in the wider market, keeping the Pound under a degree of pressure against its rivals.
Tonight’s parliamentary debate on Theresa May’s withdrawal agreement and proposed amendments could provoke additional volatility for GBP exchange rates.
Rising Eurozone Money Supply Boosts Euro
The Euro found renewed support yesterday as December’s Eurozone M3 money supply bettered expectations. As the figure increased 4.1% on the year this encouraged confidence in the underlying health of the Eurozone economy. This uptick in monetary supply suggests that inflationary pressure is continuing to build within the currency union, in spite of the European Central Bank’s (ECB) recent dovishness.
Even so, the single currency could struggle to hold onto its gains ahead of upcoming German and Eurozone consumer price index data.
US Dollar Benefits as Government Shutdown Ends
As the US government shutdown came to an end this encouraged the US Dollar to recover some of its lost ground. While a sense of political unease continues to hang over the US this move should limit the shutdown’s negative impact on the first quarter gross domestic product. A surprise rebound in January’s Dallas Fed manufacturing activity index offered additional support to USD exchange rates, meanwhile.
However, if January’s consumer confidence index shows weakness this may prompt a fresh downtrend for the US Dollar.
Rising US Oil Production Puts Pressure on Canadian Dollar
Another fall in oil prices helped to drag the Canadian Dollar down overnight, even though Brent crude did not break below the psychologically important US$60 per barrel mark. With US production continuing to expand investors remain wary of the prospect of another global oversupply glut. As market risk appetite generally diminished this latest weakening in prices left CAD exchange rates in a slump.
In the absence of any fresh Canadian data CAD exchange rates could struggle to return to a positive footing in the near term.
New Zealand Dollar Support Muted Ahead of Trade Data
Demand for the New Zealand Dollar proved rather muted yesterday, in large part thanks to the deterioration in wider market sentiment. The recovery of the US Dollar put pressure on NZD exchange rates, limiting the appeal of the risk-sensitive ‘Kiwi’. Even so, the New Zealand Dollar was still able to hold onto an uptrend against its commodity-correlated rivals.
December’s New Zealand trade data looks set to provoke additional volatility for NZD exchange rates this morning, with an improved balance likely to bolster confidence in the domestic economy.
Data Releases
January 29th 08:45 NZD Trade Balance (DEC) 225 million
January 29th 11:30 AUD NAB Business Confidence (DEC)
January 30th 02:00 USD Consumer Confidence Index (JAN) 124.6