Improved Unemployment Rate Offers Australian Dollar Boost
December’s unemployment rate saw a surprise improvement, falling from 5.2% to 5.1% and pointing towards a tightening of the Australian labour market. This gave AUD exchange rates a solid boost yesterday, even though this improvement masked a modest fall in full time employment. A sharp uptick in the latest consumer inflation expectations survey added to the positive mood of AUD exchange rates, meanwhile.
Even so, with the manufacturing PMI expected to remain in a state of negative growth support for the Australian Dollar could fade this morning.
Pound Demand Limited by Brexit Jitters
Support for the Pound proved muted as anxiety over a potential hard Brexit scenario continued to weigh on the minds of investors. Chancellor Sajid Javid failed to encourage investors in his latest comments at Davos, with markets still spooked by the prospect of a future divergence between UK and EU standards. With a long way to go before the shape of the future relationship between the two becomes clear there appeared little incentive to buy into the Pound.
Unless January’s services PMI can deliver a solid improvement on the month GBP exchange rates may struggle to find any positive footing.
Negative Consumer Confidence Keeps Euro Under Pressure
Fresh disappointment greeted the latest Eurozone consumer confidence index as it remained trapped at -8.1 in January. Confidence in the outlook of the currency union remained generally muted as a result of the index, even as the threat of US tariffs directed at France eased. Commentary from European Central Bank (ECB) President Christine Lagarde also failed to encourage the single currency as the central bank left monetary policy on hold once again.
If the German manufacturing sector slips deeper into a state of contraction EUR exchange rates look set to extend their losses further.
Signs of Weakening Economic Momentum Fail to Dent US Dollar
December’s CB leading index failed to weigh down USD exchange rates last night, even as the index fell short of forecast. A sharper-than-expected contraction of -0.3% suggests that the world’s largest economy started the year on the back foot. Even so, with the Euro falling further out of favour demand for the US Dollar remained solid.
Any evidence of a slowdown in January’s manufacturing PMI may leave the US Dollar vulnerable to selling pressure tonight, though.
Canadian Dollar Extends Losses as Oil Prices Fall
Oil prices slumped in response to the latest rise in US crude oil inventories, putting additional pressure on the commodity-correlated Canadian Dollar. Investors lacked incentive to support CAD exchange rates thanks to the higher odds of a potential 2020 Bank of Canada (BOC) interest rate cut. With the BOC looking open to the prospect of looser monetary policy the potential for Canadian Dollar gains naturally diminished.
A solid monthly rebound in retail sales could encourage CAD exchange rates to recover some of their lost ground heading into the weekend, however.
Easing Trade Worries Shore up New Zealand Dollar
A modest recovery in market risk appetite encouraged the New Zealand Dollar to make some gains overnight. As France backed down over its proposed digital sales tax in the face of threatened US tariffs the risk of a further escalation in global trade tensions appeared to recede. This offered NZD exchange rates some breathing room ahead of this morning’s inflation data.
If the headline inflation rate strengthens from 1.5% to 1.8% as forecast the New Zealand Dollar looks set to push higher still across the board.
Data Releases
January 24th 07:45 NZD Consumer Price Index (YoY) (4Q) 1.8%
January 24th 08:00 AUD Manufacturing PMI (JAN) 49
January 24th 18:30 EUR Germany Manufacturing PMI (JAN P) 44.5
January 24th 19:30 GBP Services PMI (JAN P) 51
January 24th 23:30 CAD Retail Sales (MoM) (NOV) 0.9%
January 25th 00:45 USD Manufacturing PMI (JAN P) 52.5