Weaker Jobs Market Drives Australian Dollar Losses
A sharp monthly decline in the ANZ job advertisements measure left the Australian Dollar under pressure yesterday. Markets were discouraged by this latest evidence of a loose labour market, given the Reserve Bank of Australia’s (RBA) stated preference for a lower unemployment rate. Coupled with the persistent sense of market risk aversion stemming from US-Iran tensions this left AUD exchange rates biased to the downside.
With forecasts suggesting another monthly fall in building approvals the Australian Dollar appears on track to shed further ground this morning.
Simmering Brexit Worries Weigh on Pound
As MPs returned to parliament the mood towards the Pound proved relatively muted in the absence of any major political developments. The issue of Brexit continues to hang over GBP exchange rates, with markets still concerned that the UK and EU may not achieve a fresh agreement before December 2020. This lingering sense of Brexit-based anxiety helped to limit the appeal of the Pound thanks to a lack of fresh UK data.
However, confirmation of a stronger third quarter of labour productivity may offer GBP exchange rates some support tonight.
Euro Fails to Benefit from Eurozone Inflation Uptick
Even though the Eurozone consumer price index strengthened as anticipated this was not enough to give the Euro any particular boost. While the headline inflation rate picked up from 1.0% to 1.3%, moving closer to the European Central Bank’s (ECB) 2% target, EUR exchange rates struggled to find much traction on the back of the data. With the increase in inflation largely driven by a jump in food prices investors saw little chance of ECB policymakers altering their outlook in the near future.
Another decline in German factory orders could see the single currency fall further out of favour.
Narrowed Trade Deficit Fuels US Dollar Strength
November’s trade deficit narrowed from -46.9 billion to -43.1 billion as US imports declined, buoying the US Dollar. This improvement saw the deficit hit its narrowest level since October 2016, suggesting that trade conditions are improving for the world’s largest economy. The latest ISM non-manufacturing index also offered a leg up to USD exchange rates as the sector delivered another strong month of growth.
A strong increase from the ADP employment change report could prompt further US Dollar gains tonight, with a solid showing here boding well for Friday’s non-farm payrolls data.
Canadian Dollar Slips Thanks to Fading Oil Price Boost
As the Canadian trade deficit narrowed further than forecast this encouraged CAD exchange rates to hold onto a generally positive footing. With export volumes showing a decline on the month the underlying picture of the data was less positive than initially thought, limiting the potential for greater Canadian Dollar gains. A slip in oil prices also put pressure on the commodity-correlated currency last night.
If confidence in the outlook of the Canadian economy continues to deteriorate CAD exchange rates are likely to shed further ground in the coming days.
Dairy Price Uptick Fails to Boost New Zealand Dollar
Although the Global Dairy Trade auction delivered positive growth on the fortnight this failed to shore up the New Zealand Dollar overnight. The 2.8% uptick was not enough to outweigh the previous event’s sharp -5.1% contraction in prices. As a result, worries over the health of the dairy industry outlook helped to keep the risk-sensitive New Zealand Dollar under pressure.
Without a shift in market sentiment NZD exchange rates look set to remain on the back foot today.
Data Releases
January 8th 10:30 AUD Building Approvals (YoY) (NOV) -11.7%
January 8th 17:00 EUR German Factory Orders (YoY) (NOV) -4.7%
January 8th 19:30 GBP Labour Productivity (QoQ) (Q3 F) 0.3%
January 8th 23:15 USD ADP Employment Change (DEC) 160,000