Australian Dollar Falters after US-China Trade Deal Optimism Proves Short-Lived
As the US announced the date for the signing of its phase one trade deal with China this prompted a fresh bout of optimism among investors. However, this positive mood ultimately proved short-lived thanks to the underwhelming nature of the latest Chinese manufacturing data. With the Chinese economy continuing to lose momentum worries over the health of the global trade outlook picked back up, dragging the Australian Dollar back down against its rivals.
In the absence of any fresh domestic data AUD exchange rates may struggle to find any positive traction in the near term.
UK Manufacturing Contraction Drags Down Pound
While the finalised UK manufacturing PMI saw a modest upward revision this was not enough to offer the Pound any particular degree of support. As the reading still represented a further decline into contraction territory this cast a fresh shadow over the economic outlook, raising the risk of a quarterly decline. With the index at its second weakest level since 2012 confidence in the underlying resilience of the UK economy weakened further.
Any softening of November’s consumer credit figure could add to the bearish mood of the Pound, pointing towards a weaker level of domestic confidence.
Eleventh Consecutive Month of Eurozone Manufacturing Slowdown Weighs on Euro
Confirmation that the Eurozone manufacturing sector delivered an eleventh consecutive month of contraction in December put a dampener on the Euro. Markets were particularly discouraged by the latest evidence of a sustained slowdown within the German economy, which delivered the worst performance of the Eurozone members. As the risk of a potential recession lingers this left EUR exchange rates lacking in support.
Even so, the single currency could find a rallying point tonight as long as the latest German consumer price index shows a solid uptick in inflationary pressure.
US Dollar Pushes Higher in Spite of Jobless Claims Uptick
Higher-than-expected continuing jobless claims figures failed to keep USD exchange rates under pressure overnight. Even though the US labour market showed fresh signs of loosening the US Dollar benefitted from a general easing in market risk appetite. With investor attention increasingly turning towards the next phase of US-China trade talks the safe-haven currency experienced a boost against its rivals.
Anticipation ahead of the release of the Federal Open Market Committee’s (FOMC) December meeting minutes could drag on the US Dollar over the course of the day, however.
Canadian Dollar Shakes off Disappointing Manufacturing PMI
A sharp dip in December’s manufacturing PMI was not enough to weigh down the Canadian Dollar last night. Although the index slipped from 51.4 to 50.4, disappointing forecasts, this still represented a positive month of growth for the sector. As a result, the data’s negative impact on CAD exchange rates was muted as the commodity-correlated currency benefited from an uptick in oil prices.
The latest comments from Bank of Canada (BOC) policymaker Carolyn Wilkins could provoke jitters for the Canadian Dollar heading into the weekend.
Limited Risk Appetite Prevents New Zealand Dollar Gains
Support for the New Zealand Dollar proved limited on the first trading day of 2020, in spite of the imminent signing of the US-China phase one trade agreement. The disappointing nature of December’s Chinese manufacturing PMI saw market risk appetite remain generally muted, with the world’s second largest economy still losing momentum and weighing on the global outlook.
Without a significant reversal in market risk appetite NZD exchange rates look set to remain on a weaker footing today.
Data Releases
January 3rd 19:30 GBP Net Consumer Credit (NOV) 1 billion
January 3rd 23:00 EUR German Consumer Price Index (YoY) (DEC) 1.4%
January 4th 05:00 USD Federal Open Market Committee Meeting Minutes (DEC)