29-Year Low in Chinese Growth Limits Australian Dollar Demand
The fourth quarter Chinese gross domestic product came in at 6% as forecast, helped by a strong month of industrial production and retail sales. Even so, as this represented a 29-year low in growth for the world’s second largest economy the data failed to encourage any particular sense of market confidence. As a result, the risk-sensitive Australian Dollar fell generally out of favour thanks to its common function as a market proxy for the Chinese economy.
Increasing doubt over the possibility of the US and China reaching a phase two trade agreement before the end of the year could weigh on AUD exchange rates in the days ahead.
Surprise Retail Sales Slump Fuels Pound Selling
UK retail sales delivered a surprise deterioration in December, showing their third monthly decline in a row. This suggests that consumer sentiment failed to improve in the wake of the general election result, thwarting market hopes of a strong rebound. With domestic sentiment still muted the chances of a stronger fourth quarter growth rate weakened further, putting the Pound under renewed pressure.
With high odds of a Bank of England (BoE) interest rate cut priced into GBP exchange rates, however, there appears to be less potential for further losses in the near term.
Euro Fails to Capitalise on Eurozone Construction Strength
A positive month of Eurozone construction output failed to shore up the single currency during Friday’s European session. Investors also largely shrugged off confirmation that the Eurozone consumer price index picked up sharply in December. With the French budget balance falling deeper into a state of deficit and a narrowing Eurozone current account surplus markets still found cause for concern in the EUR exchange rate outlook.
Unless the German producer price index shows a solid improvement on the month the Euro may struggle to recover its footing.
Mixed US Production Figures See Muted US Dollar Gains
The latest set of US industrial and manufacturing production figures proved rather mixed in nature, limiting the potential for US Dollar gains. However, as manufacturing output offered surprise growth and November’s industrial production figures saw an upward revision USD exchange rates held onto a positive footing. While some doubts over the underlying strength of the world’s largest economy remain this was not enough to weigh on the US Dollar for the time being.
As long as market risk appetite fails to pick up today, though, USD exchange rates could continue to push higher.
BOC Meeting Anticipation Limits Canadian Dollar Appeal
Growing anticipation ahead of the upcoming Bank of Canada (BOC) interest rate decision kept the Canadian Dollar in a holding pattern. In the absence of any fresh domestic data CAD exchange rates struggled to find any particular traction on Friday, particularly in the face of a weaker market trade appetite. With oil prices seeing little movement there was nothing to offer the Canadian Dollar any boost.
Until fresh Canadian economic data sees realise the potential for CAD exchange rate gains looks limited.
Manufacturing Sector Weakness Weighs on New Zealand Dollar
As December’s manufacturing PMI slipped into a state of contraction, clocking in at 49.3, this left NZD exchange rates on a weaker footing. With the New Zealand economy continuing to show signs of slowing investors saw little reason to buy into the risk-sensitive New Zealand Dollar ahead of the weekend.
Another day of muted market risk appetite could see NZD exchange rates shedding further ground.
Data Releases
January 20th 17:00 EUR German Producer Price Index (MoM) (DEC) 0.2%