Fading US-China Trade Optimism Weighs Down Australian Dollar
Anticipation ahead of the US and China signing their phase one trade agreement overnight failed to keep the Australian Dollar on a positive footing. As the US announced its intention to leave its tariffs on Chinese produce in place until a phase two deal is agreed the general sense of market risk appetite weakened. With markets doubtful that the two sides could reach the next phase of their deal before the end of the year AUD exchange rates were left to trend lower.
A weaker month of home loans growth may put the Australian Dollar under additional pressure today.
Surprise UK Inflation Dip Drags Pound Lower
December’s UK consumer price index missed forecasts as the headline inflation rate eased from 1.5% to 1.3%. This disappointing showing added fuel to bets that the Bank of England (BoE) will vote to cut interest rates at the end of the month, with weaker inflation giving policymakers greater incentive to act. Fresh dovish commentary from BoE policymaker Michael Saunders added to the bearish mood of GBP exchange rates.
Another negative showing from the RICS house price balance may give investors further incentive to sell out of the Pound this morning.
Euro Shrugs off Latest Signs of German Slowdown
Confirmation that the German gross domestic product slowed to just 0.6% in 2019 added to existing concerns surrounding the health of the Eurozone’s powerhouse economy. Even so, the Euro was still able to recover some of its lost ground during Wednesday’s European session. An upward revision to December’s French inflation rate offered the single currency a leg up, in spite of the limited chances of any imminent European Central Bank (ECB) hawkishness.
The nature of the ECB’s December meeting minutes could drive fresh volatility for EUR exchange rates this evening, with markets keen to gauge the central bank’s currency outlook.
US Dollar Fails to Benefit from Manufacturing Index Uptick
An unexpected improvement in the Empire State manufacturing index failed to encourage any particular demand for the US Dollar. While the index’s uptick from 3.3 to 4.8 suggests that the manufacturing sector found fresh growth in January market remain concerned by the sector’s outlook. Mixed producer price index data also weighed on USD exchange rates overnight.
However, an acceleration in advance retail sales could offer the US Dollar a stronger rallying point tonight as stronger consumer spending limits the risk of a wider economic slowdown.
Lingering Trade Worries Weigh on Canadian Dollar
With global trade tensions looking set to linger for some months yet to come the risk-sensitive Canadian Dollar struggled to find support. As oil markets returned to a bearish mood as worries over the next phase of US-China trade talks picked up CAD exchange rates saw little in the way of momentum.
In the absence of any fresh Canadian data releases the Canadian Dollar looks set to remain on a weaker footing against its rivals.
Lacklustre Food Price Index Fuels New Zealand Dollar Losses
As optimism over the US-China trade agreement faded this left the New Zealand Dollar exposed to fresh selling pressure. Another monthly contraction from the New Zealand food price index also weighed on NZD exchange rates yesterday. With domestic price pressures still failing to show signs of picking up the risk of future Reserve Bank of New Zealand (RBNZ) dovishness remains.
Unless December’s retail card spending data shows an improvement the appeal of the New Zealand Dollar is unlikely to see any particular improvement.
Data Releases
January 16th 07:45 NZD Retail Card Spending (MoM) (DEC) 0.1%
January 16th 10:01 GBP RICS House Price Balance (DEC) -8.0%
January 16th 10:30 AUD Home Loans (MoM) (NOV) 0.4%
January 16th 21:30 EUR European Central Bank Meeting Minutes (DEC)
January 16th 23:30 USD Advance Retail Sales (MoM) (DEC) 0.3%