Widened Trade Surplus Fails to Prompt Australian Dollar Gains
While the November trade surplus defied forecasts to widen to 5.8 billion this was not enough to shore up the Australian Dollar yesterday. Although export volumes saw a 2% rebound on the month worries over the economic outlook persisted, even as markets bet on the prospect of no further action between the US and Iran. The disappointing nature of the latest Chinese inflation rate weighed on risk appetite, denting the antipodean currency.
However, a stronger month of retail sales may encourage AUD exchange rates to stage a fresh rally this morning.
First Year of Retail Sales Decline Pushes Down Pound
UK retail sales showed fresh signs of struggling in December, suggesting that consumer confidence failed to pick up as hoped in the wake of the general election result. As 2019 saw the first year of sales growth contraction since records began this put a dampener on GBP exchange rates during Thursday’s European session. Selling pressure on the Pound intensified in the wake of comments from Bank of England (BoE) Governor Mark Carney which raised the odds of an interest rate cut.
As the initial impact of Carney’s words fades, however, the softened Pound could find some renewed traction.
German Production Rebound Fuels Euro Positivity
Confidence in the underlying health of the German economy improved in response to November’s industrial production data, which showed a solid 1.1% rebound on the month. This uptick helped to offset the negative impact of the previous day’s underwhelming factory orders figure, suggesting that the manufacturing sector is in a stronger state than previously though. Even so, a -2.3% fall in export growth still cast a shadow over EUR exchange rates.
Without the support of fresh Eurozone data the single currency may struggle to hold onto any uptrend for long, though.
US Dollar Shakes off Disappointing Rise in Jobless Claims
Comments from Federal Reserve Vice Chair Richard Clarida encouraged the US Dollar to hold onto a positive footing last night, even as demand for safe-haven assets diminished. With the Fed looking less likely to deliver another interest rate cut in the near future USD exchange rates continued to trend higher. While the latest continuing jobless claims figure disappointed forecasts, showing a sharp increase, this was not enough to weigh down the US Dollar at this stage.
On the other hand, a disappointing non-farm payrolls report could see the US Dollar fall out of favour with investors heading into the weekend.
Canadian Dollar Weakens Thanks to Construction Decline
A sharp -2.4% decline in building permits during November left the Canadian Dollar under pressure overnight. With the Canadian construction sector showing fresh evidence of weakening confidence in the wider economic outlook remained muted. Oil prices also slipped as markets bet that no further escalation in the US-Iran crisis is likely, adding to the losses of the commodity-correlated currency.
However, as forecasts point towards a dip in December’s unemployment rate this could encourage the Canadian Dollar to recover some of its lost ground.
Economic Activity Contraction Drags Down New Zealand Dollar
December’s ANZ truckometer index failed to impress investors, pointing towards a -2.5% slowdown in economic activity on the month. This latest evidence of weakness within the New Zealand economy weighed heavily on NZD exchange rates as the odds of a soft fourth quarter gross domestic product grew. Even though tensions between the US and Iran showed no fresh signs of flaring up this was not enough to prevent the New Zealand Dollar from trending lower.
If market risk appetite fails to pick up ahead of the weekend NZD exchange rates look set to remain on the back foot.
Data Releases
January 10th 10:30 AUD Retail Sales (MoM) (NOV) 0.4%
January 10th 23:30 CAD Unemployment Rate (DEC) 5.8%
January 10th 23:30 USD Change in Non-Farm Payrolls (DEC) 160,000