Fresh Covid-19 Outbreaks Drag Australian Dollar Down
Escalating anxiety over the situation surrounding Covid-19 saw the Australian Dollar stumble yesterday as market risk appetite deteriorated. Although the number of new infections in China showed signs of slowing this was overshadowed by news of significant outbreaks in Italy, Iran and South Korea. With the global economy looking set to face further disruption AUD exchange rates softened.
Unless the ANZ Roy Morgan weekly consumer confidence index shows a solid uptick this morning the Australian Dollar may remain on the back foot.
Pound Stumbles as French Comments Encourage Brexit Anxiety
Comments from French Europe minister Amélie de Montchalin fuelled fresh worries over Brexit at the start of the week. The indication that France will not be pressured into signing a trade deal that it doesn’t like in order to meet the current deadline left the Pound under pressure. With the two sides appearing increasingly at odds markets continued to doubt the likely of a deal being reached before the end of the year.
GBP exchange rates may rally sharply today, though, if February’s CBI reported retail sales index jumps as forecast.
Rise in German Business Expectations Benefits Euro
Demand for the Euro picked up on the back of a solid set of German IFO business sentiment indexes which pointed towards a greater sense of optimism within the Eurozone’s powerhouse economy. Investors took particular encouragement from the expectations index, which picked up from 92.9 to 93.4 in February. While doubts over the outlook of the German economy remain this sign of recovering confidence still helped to shore up the single currency.
With no change expected from the finalised fourth quarter German gross domestic product report, however, support for the euro could weaken this afternoon.
Risk Aversion and Stronger National Activity Index Boost US Dollar
The Chicago Fed national activity index showed a surprise improvement in January, rising from -0.35 to -0.25. While this still represents a month of negativity for the sector the mood towards the US Dollar improved overnight. A heightened level of market risk aversion offered additional support to USD exchange rates, meanwhile, as worries over the global growth outlook picked back up once again.
Another improvement in tonight’s consumer confidence index could see the US Dollar extending its positive run further.
Solid Trade Sales Growth Fails to Prevent Canadian Dollar Softness
While wholesale trade sales delivered a solid 0.9% monthly growth rate in December CAD exchange rates still came under pressure last night. Resurgent market anxiety over the spread of Covid-19 saw risk-sensitive assets weaken, dragging the Canadian Dollar down as oil prices plunged. With the global economy looking set to face further disruption thanks to the virus investors instead flocked to safe-haven assets.
As long as the oil market remains in a bearish mood the appeal of the Canadian Dollar looks set to remain muted today.
Softer Retail Sales Drag on New Zealand Dollar
As fourth quarter retail sales saw a sharper slowdown than forecast this left the New Zealand Dollar on a weaker footing at the start of the week. However, the negative impact of the sales data was diminished thanks to a solid rebound in January’s monthly credit card spending figure. With sales looking set to experience stronger growth at the start of 2020 this kept a floor under NZD exchange rates.
With market risk appetite likely to remain weak in the days ahead the potential for New Zealand Dollar gains appears limited.
Data Releases
February 25th 08:30 AUD ANZ Roy Morgan Weekly Consumer Confidence Index
February 25th 17:00 EUR German Gross Domestic Product (QoQ) (4Q F) 0.0%
February 25th 21:00 GBP CBI Reported Retail Sales (FEB) 4
February 26th 01:00 USD Consumer Confidence Index (FEB) 132