Building Permits Rebound Shores up Australian Dollar
As building permits staged a sharp rebound on the month in November this encouraged the Australian Dollar to push higher. While the 11.8% increase in permits seems likely to be a temporary correction this still gave investors cause for confidence in the Australian economy. As the latest escalation in US-Iran tensions failed to weigh on market sentiment for long AUD exchange rates were able to hold onto a positive trend.
However, with forecasts pointing towards a narrowed trade surplus the potential for fresh Australian Dollar losses remains.
Rising House Prices Benefit Pound Appeal
GBP exchange rates recovered some of their lost ground thanks to a solid month of growth on the Halifax house price index. The 1.7% monthly increase suggests that households adopted a more positive outlook in the wake of December’s general election result, bolstering hopes of a wider improvement in domestic sentiment. An upward revision for the finalised third quarter labour productivity index also gave the Pound a boost.
Comments from Bank of England (BoE) Governor Mark Carney may put pressure on the Pound this evening, however, if he shows any particular signs of dovishness.
German Factory Orders Slump Drags Down Euro
German factory orders cause investors off guard with an unexpected -1.3% monthly contraction in December. This latest sign of weakness within the Eurozone’s powerhouse economy left the Euro on a generally weaker footing against its rivals. With Germany appearing on course for a weak fourth quarter growth performance support for the single currency proved rather limited. A disappointing Eurozone business confidence index added to the bearish mood.
Unless German industrial production can deliver a stronger monthly reading the potential for a Euro rally appears limited today.
Solid US Employment Increase Buoys US Dollar
Demand for the US Dollar picked up in the wake of a better-than-expected ADP employment change figure, which showed an increase of 202,000 in December. With the US labour market showing fresh evidence of tightening USD exchange rates found renewed cause for confidence, even as safe-haven demand began to ease. As the odds of a stronger non-farm payrolls report increased this gave investors fresh reason to buy into the US Dollar.
If tonight’s jobless claims figures show an improvement this is likely to offer further encouragement to USD exchange rates.
Spike in Oil Prices Offers Temporary Lift to Canadian Dollar
As Brent crude spiked above US$71 per barrel in response to the latest developments in the US-Iran situation this helped to carry the Canadian Dollar higher. However, this positive mood soon faded as the risk of oil supply disruption in the Middle East appeared to diminish overnight. Even as market risk appetite recovered this was not enough to keep CAD exchange rates on a stronger footing.
Even so, a solid monthly increase in building permits and signs of a stronger construction sector may help to shore up the Canadian Dollar tonight.
US-Iran Tensions Fail to Keep up Pressure on New Zealand Dollar
Although the Iranian missile strikes on US bases in Iraq saw market risk aversion spike on Wednesday this sense of anxiety soon started to ease. With investors speculating that this could ultimately prove to be the extent of Iran’s retaliation to the assassination of top general Qassem Soleimani the mood turned a little less cautious overnight, lifting the New Zealand Dollar.
If December’s ANZ truckometer points towards a stronger level of activity within the New Zealand economy this may encourage greater strength for NZD exchange rates.
Data Releases
January 9th 07:00 NZD ANZ Truckometer (MoM) (DEC)
January 9th 10:30 AUD Trade Balance (NOV) 4.1 billion
January 9th 17:00 EUR German Industrial Production (MoM) (NOV) 0.7%
January 9th 23:30 CAD Building Permits (MoM) (NOV) 1.0%
January 9th 23:30 USD Initial Jobless Claims (JAN 4) 221,000