Australian Dollar Falters on Underwhelming Consumer Confidence
As the Westpac consumer confidence index saw a fresh deterioration in January support for the Australian Dollar weakened. With domestic sentiment continuing to sour investors saw little reason to bet on a stronger economic performance, particularly in the face of global trade anxiety. The latest belligerent US comments on trade left the risk-sensitive Australian Dollar trending lower against many of the majors.
Without signs of tightening in December’s labour market data AUD exchange rates look set to remain on a weaker footing.
Surge in UK Business Optimism Powers Pound Rally
Demand for the Pound jumped sharply during Wednesday’s European session thanks to an unexpectedly strong improvement in the first quarter CBI business optimism index. As the index surged from -44 to 23 this suggests that businesses have taken a much more positive outlook in the wake of December’s general election. Hopes that this could shore up economic activity in the months ahead gave GBP exchange rates a solid boost.
As worries over the possibility of a hard Brexit scenario mount, though, this could see the Pound shed some of its gains.
Weaker French Business Confidence Weighs on Euro
A downward revision of January’s French business confidence index put a dampener on the Euro, highlighting the lingering weakness of the Eurozone economy. The US threat to impose fresh tariffs on the EU added to the sense of single currency weakness, meanwhile. With Eurozone growth already slowing thanks to weaker global trade the prospect of further disruption weighed heavily on EUR exchange rates.
In the wake of tonight’s European Central Bank (ECB) policy announcement the mood towards the Euro could weaken further unless policymakers demonstrate increased signs of optimism.
Disappointing Manufacturing Index Limits US Dollar Support
As the Chicago Fed national activity index fell into negative territory this limited the strength of USD exchange rates. Fresh evidence of slowness within the US manufacturing sector raises the risk of the Federal Reserve adopting a more cautious stance in the coming months. With the Trump administration continuing to criticise the central bank USD exchange rates saw little support.
With forecasts pointing towards a loss of momentum from December’s leading index worries over the health of the US economy look set to pick up, to the detriment of the US Dollar.
Canadian Dollar Softens Thanks to BOC Growth Warning
Although the Bank of Canada (BOC) opted to leave interest rates on hold at its January meeting, as widely expected, this failed to shore up the Canadian Dollar. Investors instead chose to focus on the BOC’s warning that growth in the near term in likely to prove weaker than previously anticipated. Coupled with underwhelming inflation data this left CAD exchange rates biased to the downside overnight.
A sense of malaise over the Canadian growth outlook could keep the Canadian Dollar on the back foot over the course of the day.
Trade Worries Keep New Zealand Dollar Under Pressure
Support for the New Zealand Dollar proved relatively limited yesterday in the absence of any fresh domestic data releases. With markets taking a more cautious outlook in the face of the latest US signals on trade, which suggested a potential conflict to come with the EU, there was little room for NZD exchange rate gains.
Lingering worries over the global trade outlook appear set to keep the New Zealand Dollar on a weaker footing in the near term.
Data Releases
January 23rd 10:30 AUD Unemployment Rate (DEC) 5.2%
January 23rd 22:45 EUR European Central Bank Rate Decision 0.0%
January 24th 01:00 USD Leading Index (DEC) -0.2%