Market Malaise Limits Australian Dollar Support
A modest uptick in the ANZ Roy Morgan weekly consumer confidence index was not enough to boost the Australian Dollar yesterday. Although domestic sentiment showed signs of picking up this was overshadowed by a generally muted sense of market risk appetite. Lingering anxiety over the health of global trade in the months ahead gave AUD exchange rates little cause for confidence.
With forecasts pointing towards a softening of the Westpac consumer confidence index support for the Australian Dollar is unlikely to see any particular improvement this morning.
Solid UK Labour Market Signals Benefit Pound
The mood towards the Pound improved on the back of the latest raft of UK labour market data. As jobless claims saw a smaller increase than anticipated in December this encouraged hopes that the economy could be returning to a stronger footing. Investors also took encouragement from unexpectedly steady average weekly earnings growth, even though this is unlikely to alter the current policy outlook of the Bank of England (BoE).
If the CBI business optimism index shows a solid improvement on the month this could help GBP exchange rates push higher.
Rising German Economic Sentiment Unable to Boost Euro
Even though the German ZEW economic sentiment index saw a sharp jump in January the Euro remained on a weaker footing against its rivals. The index’s improvement from 10.7 to 26.7 failed to offset existing worries over the outlook of the Eurozone’s powerhouse economy, leaving the single currency exposed to selling pressure.
Growing anticipation ahead of tomorrow’s European Central Bank (ECB) policy announcement looks set to keep the Euro under pressure in the near term.
Political Pressure on Federal Reserve Dents US Dollar
A lack of fresh US data limited the potential for USD exchange rate gains overnight, in spite of a weaker sense of market risk appetite. With the Federal Reserve coming under attack from the Trump administration once again investors remained wary of the potential for further monetary loosening to come in the months ahead.
As markets expect to see December’s Chicago Fed national activity index weaken the odds of a US Dollar rally appear limited.
Manufacturing Sales Decline Pushes Down Canadian Dollar
A sharper-than-expected monthly decline in manufacturing sales weighed heavily on the Canadian Dollar overnight. Confidence in the underlying health of the Canadian economy weakened as sales contracted -0.6% in November, pointing towards a weaker level of business optimism. Growing anticipation ahead of the upcoming Bank of Canada (BOC) interest rate decision added to the weakness of CAD exchange rates.
Evidence of an easing in inflationary pressure in December could drag the Canadian Dollar lower tonight.
Softer Services PMI Fails to Weigh on New Zealand Dollar
While December’s services PMI eased from 52.9 to 51.9 this failed to put any particular pressure on the New Zealand Dollar. With the service sector still demonstrating solid monthly growth investors saw little reason to sell out of the risk-sensitive currency. Although confidence in the global growth outlook remained muted NZD exchange rates were able to shrug off lingering bearishness.
As long as market risk appetite fails to pick up today, though, the New Zealand Dollar could fall out of favour.
Data Releases
January 22nd 09:30 AUD Westpac Consumer Confidence (JAN) -0.8%
January 22nd 21:00 GBP CBI Business Optimism Index (JAN) -24
January 22nd 23:30 CAD Consumer Price Index (YoY) (DEC) 2.3%
January 22nd 23:30 USD Chicago Fed National Activity Index (DEC) 0.15