Stagnant UK Growth Limits Pound Upside

Business Confidence Miss Unable to Prevent Australian Dollar Gains

A weaker-than-expected NAB business confidence index was not enough to prevent the Australian Dollar gaining fresh ground yesterday. Although the index remained in negative territory this was overshadowed by the positive nature of December’s home loans growth. With lending seeing a 4.4% increase in the month AUD exchange rates found a fresh rallying point, in spite of lingering concerns over the wider economic outlook.

As long as markets remain optimistic over the chances of the Wuhan coronavirus outbreak having a more limited impact on global growth the Australian Dollar should remain on a stronger footing.

Pound Sees Limited Downside on Stagnant UK Growth

Confirmation that the UK economy stagnated in the fourth quarter failed to put any significant pressure on the Pound overnight. Even though the quarterly growth rate stalled this was counterbalanced by a stronger monthly performance in December. Signs that growth momentum started to recover in the wake of the general election result fuelled hopes of a stronger first quarter economic performance, limiting the potential for Pound losses.

Growing anxiety over the future relationship between the UK and EU may still see GBP exchange rates falter in the near future, though.

Eurozone Slowdown Warning Weighs on Euro

As European Central Bank (ECB) President Christine Lagarde noted that the Eurozone economy has been in a state of slowdown since the start of 2018 the mood towards the Euro soured. While Lagarde indicated that the problem requires more than just monetary policy action EUR exchange rates came under pressure in the wake of the comments.

Another underwhelming performance from Eurozone industrial production figures could push the single currency lower across the board tonight.

US Dollar Fails to Capitalise on Business Optimism Uptick

Although January’s NFIB small business optimism index picked up further than forecast USD exchange rates slipped last night. The index’s uptick from 102.7 to 104.3 failed to encourage investors to favour the US Dollar as focus instead fell on a disappointing JOLTs job openings report. With the US economy still showing mixed signs of health and as market risk appetite increased the US Dollar weakened.

Ahead of tonight’s monthly budget statement support for the US Dollar is likely to prove limited, with forecasts pointing towards another deficit.

Oil Worries Limit Canadian Dollar Appeal

Even though market anxiety over the spread of the Wuhan coronavirus strain appeared to ease the Canadian Dollar remained soft. While investors hope that the outbreak’s ultimate impact on the global economy will prove limited the risk of lower Chinese oil demand kept CAD exchange rates under pressure.

The latest US crude oil inventories report could see the Canadian Dollar shed further ground if prices weaken in response to a higher level of US output.

ANZ Truckometer Rebound Supports New Zealand Dollar

The New Zealand Dollar found some support thanks to a solid performance from January’s ANZ truckometer index. As the report suggested that the economic slowdown in New Zealand had found a floor, limiting the risk of future deterioration. However, while the data points towards a greater level of resilience within the economy NZD exchange rates still came under some pressure last night.

If the Reserve Bank of New Zealand (RBNZ) offers any dovish signals this morning demand for the New Zealand Dollar looks set to weaken sharply.

Data Releases

February 12th 11:00 NZD Reserve Bank of New Zealand Rate Decision 1.0%
February 12th 20:00 EUR Eurozone Industrial Production (Mom) (DEC) -1.7%
February 13th 05:00 USD Monthly Budget Statement (JAN) -11.5 billion

Louisa Heath