Australian Dollar Surges as RBA Keeps Rates Unchanged

Australian Dollar (AUD) Surges as RBA Leaves Rates on Hold

The Australian Dollar (AUD) roared higher on Tuesday in response to the Reserve Bank of Australia’s (RBA) first policy decision of 2020. This saw the RBA leave rates on hold as expected, with the ‘Aussie’ rallying on the back of the bank’s surprisingly optimistic outlook for the domestic economy in spite of the threats from the bushfires and the Coronavirus.

Looking ahead, we have a speech from RBA Governor Philip Lowe on the agenda today, but given that the RBA only just gave its latest policy statement we aren’t expecting many surprises,
limiting movement in AUD exchange rates.

Pound (GBP) Flat on Improved Construction PMI

After an initial slump, the Pound (GBP) was able to bounce back yesterday, on the back of the UK’s latest construction PMI. This revealed that the UK’s construction sectored continued to contract at January, it did so at its slowest pace since May, with the index jumping more than expected last month.

Coming up we may see Sterling supported by the final release of the UK’s services PMI, if they confirm a strong rebound in service sector activity last month.

Euro (EUR) Muted in the Absence of Data

The Euro (EUR) traded in a narrow range through yesterday’s session as a lull in domestic data left the single currency directionless.

Looking ahead, the Euro could find some direction later this evening as the latest Eurozone PMI figures are expected to confirm a slowing of growth in the service sector last month.
Coupled with a forecast that the Eurozone’s retail sales figures will report a sizable slump in sales growth in December, this could send the Euro lower during today’s European session.

US Dollar (USD) Firms on Strong Factory Data

The US Dollar (USD) trended higher overnight on Tuesday as markets cheered the latest US factory order figures. These indicated a strong pick-up in US factory activity in December, with order growth rocketing from –1.2% to 1.8%, the highest reading in over a year.

On the docket for USD investors mid-week is the latest ISM non-manufacturing PMI. Will another solid performance in the US service sector last month strengthen the US Dollar overnight?

Canadian Dollar (CAD) Stable Following Rebound in Oil Prices

The Canadian Dollar (CAD) held its ground through Tuesday’s trading session as a solid rebound in oil prices lent some support to the commodity-linked currency.

New Zealand Dollar (NZD) Steady ahead of Employment Data

The New Zealand Dollar (NZD) was mostly rangebound through Tuesday’s session, with the ‘Kiwi’ being supported by hopes the RBA’s more optimistic outlook will be mirrored by the Reserve Bank of New Zealand (RBNZ) next week.

Meanwhile, NZD exchange rates may firm later this morning if data shows that domestic employment growth accelerated in the fourth quarter.

Data Releases

07:45 NZD Unemployment Rate (Q4)
19:00 EUR Services PMI (Jan)
19:30 GBP Services PMI (Jan)
20:00 EUR Retail Sales (Dec)
23:30 CAD Trade Balance (Dec)
23:30 USD Trade Balance (Dec)
23:30 ADP Employment Change (Jan)
01:00 USD ISM non-Manufacturing PMI (Jan)

Louisa Heath