Stronger Chinese Growth Forecast to Support Australian Dollar
Hopes of a sustained recovery in global trade offered the Australian Dollar support, even in the absence of any fresh domestic data. However, any souring in market risk appetite could easily see AUD exchange rates slide in the near future. With confidence in the Australian economy still muted any evidence of a Chinese slowdown may put significant pressure on the antipodean currency, as Chinese weakness would have a knock-on effect on the fourth quarter Australian growth rate.
Pound Slips as Brexit Worries Mount
Resurgent market anxiety over Brexit saw the Pound fall out of favour this week, with investors still spooked by the prospect of a potential cliff-edge waiting at the end of 2020. Until a greater sense of clarity over the shape of the UK’s future relationship with the EU emerges GBP exchange rates are likely to remain biased to the downside. However, if December’s finalised UK PMIs see an upward revision next week this could help the Pound to recover some of its recent losses.
Signs of ECB Dovishness Set to Dent Euro
The mood towards the Euro could sour in response to the European Central Bank’s (ECB) final economic bulletin of 2019. If the bulletin signals the central bank’s intent to maintain a policy easing bias in the coming months this is likely to drag EUR exchange rates lower across the board. On the other hand, if the ECB appears to adopt a more positive outlook in the bulletin this could encourage the single currency to gain fresh ground as the risk of looser monetary policy diminishes.
Manufacturing Sector Worries Weigh on US Dollar
Underwhelming US data limited the potential for US Dollar gains this week, especially as easing trade tensions inclined investors to pile into higher-yielding assets. With the US manufacturing sector showing signs of easing in the fourth quarter the risk of a gross domestic product slowdown remains, to the detriment of USD exchange rates. Unless the sector can demonstrate greater resilience in response to ongoing tensions with China the US Dollar could struggle to make any significant gains.
Business Confidence Set to Provoke Canadian Dollar Volatility
After a disappointing monthly gross domestic product reading the Canadian Dollar has been exposed to selling pressure, with markets wary of the potential for a sustained growth slowdown. This evening’s CFIB business barometer could put additional pressure on CAD exchange rates if small business confidence fails to show signs of recovery. Unless markets see reason to bet on the prospect of stronger Canadian growth CAD exchange rates look set to remain on the back foot.
New Zealand Dollar Looks for Sustained Risk Appetite Support
A generally improved sense of market risk appetite has kept the New Zealand Dollar on a stronger footing as anxiety over the global trade outlook eased. As long as the Chinese economy delivers signs of greater resilience in the days ahead this should help NZD exchange rates to hold onto their gains. If December’s Chinese manufacturing PMI strengthens on the month as forecast this could give the New Zealand Dollar a fresh boost against its rivals.
Data Releases
December 27th 19:00 EUR European Central Bank Economic Bulletin
December 27th 19:30 GBP BBA Loans for House Purchase (NOV) 41,200
December 27th 21:00 CAD CFIB Business Barometer (DEC)