Chinese Tariff Cuts Prompt Australian Dollar Jump
Demand for the Australian Dollar picked up in response to the news that China will slash its import tariffs on more than 850 products on 1st January. Investors adopted a more risk-positive outlook in the wake of the announcement, pushing AUD exchange rates higher on the prospect of reduced global trade tensions. Even though November’s private sector credit figures failed to improve as forecast this was not enough to knock the antipodean currency off its uptrend.
As long as market confidence remains elevated this should keep the Australian Dollar on a positive footing today.
Brexit Worries Limit Pound Upside
The Pound fell out of favour at the start of the week as the impact of earlier UK consumer confidence data faded. Worries over the outlook of the UK economy lingered as markets continue to lack clarity over the shape of its future relationship with the EU. As the risk of a cliff-edge Brexit scenario remains this kept GBP exchange rates under pressure, in spite of the decreased sense of political uncertainty.
Anxiety over the future of the UK economy looks set to hang over the Pound this week as markets lack the distraction of fresh domestic data.
Improved German Import Price Index Lifts Euro
EUR exchange rates found some support on the back of November’s German import price index data as price pressures showed signs of picking up. As prices strengthened 0.5% on the month this encouraged hopes that inflationary pressure could show similar growth in the months ahead. While this is unlikely to be enough to alter the current outlook of the European Central Bank (ECB) the improved figures still offered the single currency a boost.
Even so, the Euro could struggle to hold onto its gains for long as markets wind down ahead of Christmas.
US Dollar Slides Thanks to Durable Goods Orders Slump
November’s durable goods orders saw a surprise slump of -2% on the month, highlighting a greater sense of anxiety within the world’s largest economy. This disappointing showing saw the US Dollar trending lower last night as markets remain wary of the potential for a fourth quarter slowdown. While the Chicago Fed national activity index delivered a modest improvement this was not enough to prevent USD exchange rates from weakening.
However, as forecasts point towards a solid rebound in the latest Richmond Fed manufacturing index this could offer the US Dollar a rallying point tonight.
Surprise Growth Contraction Drags on Canadian Dollar
The mood towards the Canadian Dollar soured as October’s monthly gross domestic product fell short of forecast. As the growth rate unexpectedly contracted -0.1% CAD exchange rates came under fresh pressure. With the Canadian economy having started the fourth quarter on a weaker footing the risk of a sustained slowdown rose, to the detriment of the Canadian Dollar.
With trading volumes thin during the festive season CAD exchange rates look set to remain on the back foot in the days ahead.
Risk Appetite Boosts New Zealand Dollar Appeal
As market risk appetite generally improved the New Zealand Dollar gained ground across the board. With global trade tensions continuing to ease the risk-sensitive NZD found fresh favour with investors. Markets remain hopeful that improving global conditions will shore up the New Zealand economy in the months ahead, reducing the likelihood of any Reserve Bank of New Zealand (RBNZ) interest rate cuts.
Unless investor sentiment sours the New Zealand Dollar could continue to push higher ahead of the Christmas break.
Data Releases
December 25th 01:00 USD Richmond Fed Manufacturing Index (DEC) 9