Inflation Rate Uptick Unable to Shore up Australian Dollar
The fourth quarter consumer price index surprised to the upside, clocking in at 1.8% rather than holding steady at 1.7% as forecast. Even though this improvement suggests that inflationary pressure is building within the Australian economy, reducing the case for a Reserve Bank of Australia (RBA) interest rate cut, this still failed to shore up the Australian Dollar. Persistent market anxiety over the Wuhan coronavirus and its likely impact on global growth kept AUD exchange rates biased to the downside.
With the fourth quarter export price index expected to show a sharp contraction on the month the Australian Dollar is likely to remain under pressure over the course of the day.
Pound Slides in Spite of Housing Price Growth Acceleration
Although the Nationwide house price index delivered a solid acceleration the Pound remained under pressure during Wednesday’s European session. While the UK housing market showed signs of recovery at the start of the year a sense of caution over the wider economic outlook remains. As Brexit-based uncertainty continues to hang over the economy GBP exchange rates slipped lower overnight.
Unless the Bank of England (BoE) expresses greater signs of optimism at its January policy meeting the appeal of the Pound looks set to weaken further.
Rising German Consumer Confidence Offers Euro Boost
An unexpected improvement in the German GfK consumer confidence index gave the Euro cause for confidence yesterday. As sentiment within the Eurozone’s powerhouse economy showed a modest uptick on the month the mood towards the single currency improved. Even so, with December’s German import price index figures still pointing towards muted inflationary pressure EUR exchange rates failed to rally sharply.
With the German consumer price index expected to accelerate from 1.5% to 1.7% on the year in January demand for the single currency could pick up further tonight.
Risk Aversion Keeps US Dollar on Stronger Footing
Market anxiety over the economic impact of the Wuhan coronavirus situation kept the US Dollar on a bullish trend against its rivals. With markets favouring safe-haven assets in the face of a likely slowdown in global growth USD exchange rates found fresh gains. Even so, as the Federal Reserve remains under political pressure to cut interest rates the upside potential of the US Dollar was still somewhat limited.
Confirmation that the US economy delivered a solid annualised gross domestic product in the fourth quarter could encourage USD exchange rates to hold onto their gains.
Limited Oil Price Rally Fails to Boost Canadian Dollar
A temporary rally in oil prices failed to keep the Canadian Dollar on a stronger footing overnight as markets continued to bet on the prospect of reduced Chinese demand. With confidence in the global economic outlook still weakening CAD exchange rates found little traction, driven lower by the general decline in market risk appetite.
Any improvement in January’s CFIB business barometer could help to shore up the Canadian Dollar this evening as markets look for evidence of greater domestic resilience.
Global Growth Anxiety Drives New Zealand Dollar Lower
Worries over the prospect of weaker global growth continued to weigh on the New Zealand Dollar yesterday. Anxiety over the Wuhan coronavirus outbreak encouraged investors to adopt a risk averse mind-set, leaving NZD exchange rates on the back foot for another day. With both the Chinese and wider global economy looking set to lose momentum in the face of the outbreak markets saw little cause for confidence.
This morning’s set of trade figures could offer the New Zealand Dollar some support, however, provided that the deficit narrows as forecast on the month.
Data Releases
January 30th 07:45 NZD Trade Balance (DEC) -100 million
January 30th 10:30 AUD Export Price Index (QoQ) (4Q) -5.4%
January 30th 21:00 CAD CFIB Business Barometer (JAN)
January 30th 22:00 GBP Bank of England Rate Decision 0.75%
January 30th 23:00 EUR German Consumer Price Index (YoY) (JAN) 1.7%
January 30th 23:30 USD Annualised Gross Domestic Product (QoQ) (4Q F) 2.1%