Narrowed Trade Surplus Pressures Australian Dollar
December’s trade balance fell short of forecast, showing a surprise narrowing of the trade surplus in the final month of 2019. As export volumes saw a smaller uptick than anticipated this put the Australian Dollar under fresh pressure, even in the face of China’s move to cut tariffs on US products. A disappointing monthly drop in retail sales over the Christmas period also dampened the appeal of the antipodean currency.
This morning’s release of the Reserve Bank of Australia (RBA) statement on monetary policy could push AUD exchange rates lower if it offers any dovish signals.
UK-EU Trade Anxiety Dents Pound Appeal
Support for the Pound remained decidedly muted overnight as anxiety over the future trade relationship between the UK and EU persisted. Doubts over the two sides’ ability to reach a mutually agreeable deal before the end of the year kept GBP exchange rates under pressure in the absence of any fresh domestic data.
With forecasts suggesting a softening of the Halifax house price index the Pound looks vulnerable to further selling pressure heading into the weekend.
Euro Slides on German Factory Orders Slump
German factory orders extended their decline in December, slumping -2.1% on the month and raising the odds of a weaker fourth quarter economic performance. While January’s German construction PMI showed an improvement this was not enough to shore up the single currency last night. With markets seeing greater reason to doubt the resilience of the Eurozone’s powerhouse economy support for the Euro naturally diminished.
EUR exchange rates could shed further ground on the back of December’s German trade data, with forecasts pointing towards a narrowed surplus.
Lower Jobless Claims Shore up US Dollar
As the latest initial jobless claims figure showed a smaller uptick than anticipated the US Dollar found fresh support against its rivals. A solid quarterly increase in non-farm productivity also helped to paint a positive picture of the economic outlook, suggesting that that US remains on track for further growth. Although the general sense of market risk aversion eased this was not enough to knock USD exchange rates off their positive footing.
If January’s non-farm payrolls report shows a solid increase on the month this could encourage further demand for the US Dollar tonight.
Weak Oil Prices Fail to Weigh on Canadian Dollar
A fresh decline in oil prices was not enough to drag down the Canadian Dollar overnight. While investors remain concerned by the prospect of a slowdown in global oil demand, driven by lower Chinese growth, CAD exchange rates held onto a positive footing. With the OPEC+ group looking poised to cut oil output once again, though, this support could prove short-lived.
If January’s unemployment rate holds steady at 5.6%, however, this may limit the potential for Canadian Dollar losses ahead of the weekend.
Chinese Tariff Cuts Boost New Zealand Dollar
As China announced its decision to cut tariffs on more than 1,500 US products the mood towards the risk-sensitive New Zealand Dollar improved. Markets hope that the move could help to offset the increasing economic impact of the Wuhan coronavirus outbreak, limiting the risk of a sharp 2020 slowdown. This encouraged NZD exchange rates to recover some of their lost ground, even as anxiety over the spread of the virus lingered.
The nature of the Reserve Bank of New Zealand’s (RBNZ) 2-year inflation expectations report could offer the New Zealand Dollar an additional boost, meanwhile.
February 7th 10:30 AUD Reserve Bank of Australia Statement on Monetary Policy
February 7th 12:00 NZD Reserve Bank of New Zealand 2-Year Inflation Expectation (1Q)
February 7th 17:00 EUR German Balance of Trade (DEC) 15 billion
February 7th 23:30 CAD Unemployment Rate (JAN) 5.6%
February 7th 23:30 USD Change in Non-Farm Payrolls (JAN) 160,000