Global Growth Fears Continue to Limit Australian Dollar Demand
Lingering market anxiety over the Covid-19 outbreak and its likely impact on the global economy limited the potential for Australian Dollar gains. Analysis from Nomura suggests that the Chinese economy could experience a sharp loss of momentum in the first quarter, even if the infection rate stabilises and economic activity resumes in the near term. As the Australian Dollar commonly functions as a market proxy for sentiment towards the Chinese economy this left AUD exchange rates under pressure.
The release of the Reserve Bank of Australia’s (RBA) latest set of meeting minutes may see the Australian Dollar shedding ground this morning if they prove less confident in nature.
Rise in UK Household Confidence Fails to Boost Pound
While the IHS Markit household finance index suggested that UK consumer confidence had risen to its highest level in eleven years this failed to shore up the Pound for long. Even though households expressed greater optimism in their economic outlook this was not enough to outweigh the latest bout of Brexit-based anxiety. As France continued to warn that the UK will face a tough period of negotiation support for GBP exchange rates remained muted.
Demand for the Pound could weaken further this evening if December’s growth in average weekly earnings eases as forecast.
Euro Falters amid Doubts of Inflation Returning to ECB Target
A Reuters poll of economists suggested that the European Central Bank’s (ECB) loose monetary policy will not succeed in bringing inflation back in line with the central bank’s target. Although the survey also indicated that the economy is not facing any detrimental impact from the current level of monetary policy this was not enough to keep the Euro from softening. However, with the ECB looking unlikely to deliver any further monetary loosening this kept a floor under EUR exchange rates.
Any softening of the German ZEW economic sentiment index may drag the single currency lower across the board tonight.
Lack of Activity Limits US Dollar Support
With Wall Street closed to mark Presidents’ Day the US Dollar struggled to find any significant momentum at the start of the week. In the absence of fresh domestic data USD exchange rates were supported by market anxiety over Covid-19 and the global growth outlook. Even so, with investors adopting a less bearish outlook for the time being the US Dollar saw little support overnight.
A modest uptick in the Empire manufacturing index for February could encourage USD exchange rates to return to a stronger footing, however.
Increasing Investment Outflow Weighs on Canadian Dollar
Confidence in the Canadian economy took a fresh blow as December’s foreign securities purchases figure highlighted a larger net outflow. With a higher level of funds leaving the Canadian economy investors saw little cause for confidence in the Canadian Dollar, given existing worries over the domestic outlook.
However, as forecasts point towards a solid monthly rebound in manufacturing sales this may offer CAD exchange rates a boost tonight.
Strong Service Sector Growth Offers New Zealand Dollar Encouragement
January’s services PMI delivered a strong performance, jumping from 52.1 to 57.1 and pointing towards a solid level of activity within the sector. This offered the New Zealand Dollar encouragement, helping to overshadow the disappointing nature of the corresponding manufacturing index. Even so, NZD exchange rates soon came under renewed pressure as worries over the health of the Chinese economy picked back up.
Without the support of fresh domestic data the New Zealand Dollar looks vulnerable to any further deterioration in market sentiment.
Data Releases
February 18th 10:30 AUD Reserve Bank of Australia Meeting Minutes (FEB)
February 18th 19:30 GBP Average Weekly Earnings (3M/YoY) (DEC) 3.0%
February 18th 20:00 EUR German ZEW Economic Sentiment Index (FEB) 22
February 18th 23:30 CAD Manufacturing Sales (MoM) (DEC) 0.7%
February 18th 23:30 USD Empire Manufacturing (FEB) 5.0