Australian Dollar Traction Limited on Data-Light Day
The Australian Dollar struggled to find any particular traction against its rivals yesterday thanks to a limited degree of market activity. With fresh economic data relatively thin on the ground AUD exchange rates were left on a weaker footing, given a growing sense of market risk aversion. The relative strength of the US Dollar also limited the potential for Australian Dollar gains.
Ahead of tomorrow’s Westpac consumer confidence index report AUD exchange rates look set to remain biased to the downside.
Hard Brexit Fears Drag on Pound Demand
Worries over the risk of a hard Brexit scenario picked up over the weekend, leaving the Pound exposed to renewed selling pressure. As ratings agency Moody’s also warned that the UK economy is only likely to deliver growth of 1.0% in 2020 markets continued to bet on the odds of the Bank of England (BoE) easing monetary policy. All in all, the appeal of the Pound remained limited during Monday’s European session.
If average weekly earnings growth slows as forecast in the three months to November the Pound could extend its losses further.
Euro Muted as Expectations of German Slowdown Grow
As the Bundesbank suggested that the German economy grew at its slowest pace since the Eurozone debt crisis in 2019 the appeal of the Euro weakened. With the Eurozone’s powerhouse economy on track for a sharp slowdown the single currency struggled to find any particular traction against its rivals. The central bank noted particular weakness in the manufacturing sector, highlighting the likelihood of a further loss of economic momentum in the months ahead.
Even so, an uptick in the ZEW economic sentiment survey may offer EUR exchange rates a leg up this evening.
Lack of US Activity Fails to Prevent US Dollar Gains
Although US markets were closed for a bank holiday this failed to keep USD exchange rates down last night. Lingering market risk aversion helped to shore up the safe-haven US Dollar even in the absence of fresh domestic data. As confidence in the global growth outlook continued to deteriorate this gave USD exchange rates support.
However, with US data thin on the ground the US Dollar may struggle to hold onto a positive footing against its rivals in the near term.
Canadian Dollar Benefits from Bump in Oil Prices
As oil prices maintained a positive trend the Canadian Dollar continued to push higher across the board overnight. With Libyan oilfields shutting down in the face of a military blockade global demand for oil rose, lifting the commodity-correlated CAD against its rivals. However, as markets expect the disruption from the closure to prove more limited than initially thought these gains could prove short-lived.
If manufacturing sales continue to contract on the month this could put a dampener on the Canadian Dollar tonight.
Lack of Risk Appetite Stifles New Zealand Dollar
With market risk appetite still limited at the start of the week the New Zealand Dollar remained on the back foot. As investors remain wary of the prospect of global trade weakness persisting for some months to come there appeared little reason to support NZD exchange rates at this stage.
Another strong month of growth for December’s services PMI may encourage the New Zealand Dollar to recover some of its lost ground, however.
Data Releases
January 21st 07:30 NZD Services PMI (DEC) 53
January 21st 19:30 GBP Weekly Earnings ex Bonus (3M/YoY) (NOV) 3.4%
January 21st 20:00 EUR German ZEW Economic Sentiment Index (JAN) 15
January 21st 23:30 CAD Manufacturing Sales (MoM) (NOV) -0.3%