Signs of Stabilising Covid-19 Infection Rate Boost Australian Dollar
As global fears over Covid-19 showed renewed signs of easing the Australian Dollar returned to a positive footing once again. China’s admission that it had miscounted roughly a hundred deaths gave markets a renewed sense of optimism amid hopes that the infection rate is stabilising within the country. With investors more inclined to buy into higher-yielding assets ahead of the weekend AUD exchange rates found fresh purchase.
Ahead of the release of the Reserve Bank of Australia’s (RBA) meeting minutes on Tuesday support for the Australian Dollar could fade, however.
Pound Strength Fades as Cabinet Drama Retreats
Reaction to the first meeting of Boris Johnson’s new cabinet proved muted as the impact of Sajid Javid’s surprise departure faded. In the absence of any fresh positive domestic data investors lacked any significant incentive to favour the Pound over its rivals at this juncture. With signs still pointing towards a hardened EU negotiating stance a sense of Brexit-based anxiety dogged GBP exchange rates once again.
As markets brace for the release of the latest UK wage and inflation data the potential for a Pound rebound looks limited.
Stagnant German Growth Drags Down Euro
While the German economy avoided contraction in the fourth quarter investors were still disappointed to find that growth had stagnated at the end of 2019. All in all, this did not paint a particularly encouraging picture of the Eurozone’s powerhouse economy, fuelling fears that a further slowdown is on the cards. Although the stagnation was not enough to prevent 0.1% quarterly growth for the overall Eurozone the mood towards the Euro still soured.
Even if December’s Eurozone construction output shows another solid month of growth the single currency may remain on the back foot today.
Underwhelming US Production Signals Weigh on US Dollar
Confirmation that US advance retail sales picked up modestly on the month in January offered the US Dollar limited support during Friday’s European session. Weaker industrial and manufacturing production figures added to worries over the health of the world’s largest economy, highlighting the negative impact of the global trade slowdown. While the US looks increasingly at risk of an underwhelming gross domestic product performance, though, USD exchange rates only saw limited losses.
Any resurgence in market risk aversion may encourage the US Dollar to return to a stronger footing against its rivals.
Canadian Dollar Benefits from Oil Price Uptick
A solid rebound in oil prices encouraged the Canadian Dollar to push higher heading into the weekend. With markets adopting a less risk-averse mentality as China revised its Covid-19 death count lower CAD exchange rates benefitted from a renewed sense of investor optimism.
Even so, any softening in the oil market or deterioration in global market sentiment could easily weigh on demand for the Canadian Dollar in the days ahead.
Weak NZ Manufacturing PMI Encourages New Zealand Dollar Selling
Rather than returning to a positive state of growth the New Zealand manufacturing PMI remained trapped below the neutral baseline of 50 in January. The underwhelming reading of 49.6 suggests that the New Zealand economy continued to struggle at the start of the year, offering investors renewed cause for caution. This left the New Zealand Dollar on a weaker footing even as Covid-19 fears showed fresh signs of easing.
A similarly underwhelming services PMI could drag NZD exchange rates lower across the board this morning.
Data Releases
February 17th 07:30 NZD Services PMI (JAN) 51.3
February 17th 20:00 EUR Eurozone Construction Output (YoY) (DEC) 1.4%