Better-Than-Expected Chinese Data Shores up Australian Dollar
A smaller-than-expected contraction in November’s Chinese industrial profits figure helped to shore up the Australian Dollar heading into the weekend. With market risk appetite generally increasing in anticipation of a signed phase one US-China trade agreement AUD exchange rates were able to push higher. Although the likelihood of the two sides reaching a phase two agreement in the near future looked decidedly limited this failed to prevent the Australian Dollar making moderate gains.
Growing anticipation ahead of the latest Chinese and Australian manufacturing PMIs could see AUD exchange rates slump today.
Temporary Lull in Brexit Worries Benefits Pound
In the absence of any fresh UK data or political developments the Pound returned to a positive footing against its rivals. While the future relationship of the UK and EU remains unclear the lingering risk of a cliff-edge Brexit failed to keep GBP exchange rates on the back foot in the wake of the Christmas break. Even so, the Pound’s latest bout of strength still looked decidedly fragile in nature.
As markets continue to lack clarity over the Brexit situation, and officials remain dubious of the ability to conclude talks within the truncated transition period, GBP exchange rates could falter.
Signs of ECB Optimism Fail to Support Euro
Although the European Central Bank (ECB) demonstrated a greater degree of optimism in its final economic bulletin of 2019 this was not enough to shore up the single currency. While the ECB noted that the global growth outlook showed signs of stabilising in the fourth quarter the central bank still appears prepared to maintain its dovish policy bias. With ECB interest rates looking set to remain lower for longer support for the Euro generally weakened.
A solid rebound in German retail sales could help the single currency to recover some ground this afternoon.
US Dollar Remains Under Pressure over Labour Market Worries
Worries over the health of the US economy lingered in the wake of a mixed set of jobless claims figures. With the labour market struggling to tighten further USD exchange rates came under renewed pressure in the face of improved market risk appetite. As hopes of US-China trade progress encouraged investors to pile into higher-yielding assets this left the safe-haven US Dollar on the back foot.
As forecasts point towards a widening of November’s advance goods trade deficit USD exchange rates look set to shed further ground tonight.
Extended Small Business Confidence Decline Drags on Canadian Dollar
A continued decline in small business optimism left the Canadian Dollar under pressure, with the CFIB business barometer falling to its lowest level of 2019. This deterioration suggests that the Canadian economy could remain under pressure in the months ahead, leaving the Bank of Canada (BOC) with less cause for confidence. With oil prices also faltering CAD exchange rates slipped lower across the board.
If market risk appetite remains elevated, however, this could help the Canadian Dollar recover some ground in the near term.
US-China Trade Optimism Fuels New Zealand DollarGains
With markets optimistic that the signing of the phase one US-China trade is imminent the New Zealand Dollar remained on a relatively positive footing on Friday. Signs of greater resilience within the Chinese economy also encouraged NZD exchange rates to hold their ground, with investors seeing little reason to sell out of the risk-sensitive currency ahead of the weekend.
However, as US-China trade talks still have significant ground to cover the New Zealand Dollar may struggle to maintain its positive momentum today.
Data Releases
December 30th 17:00 EUR German Retail Sales (MoM) (NOV) 1%
December 30th 23:30 USD Advance Goods Trade Balance (NOV) -68.75 billion