Australian Dollar Weighed Down by Private Capital Expenditure Drop
Confidence in the outlook of the Australian economy took a fresh blow as the fourth quarter private capital expenditure figure fell significantly short of forecast. While markets had expected to see a modest uptick of 0.4% on the quarter expenditure instead plunged -2.8%, suggesting a greater degree of anxiety among businesses. Coupled with lingering worries over the global economic ramifications of Covid-19 this left AUD exchange rates on the back foot.
If January’s private sector credit figures also disappoint the Australian Dollar could end the week on a downtrend.
Jump in No-Deal Brexit Odds Drive Pound Lower
The Pound plunged sharply lower across the board overnight after the UK government indicated its willingness to walk away from trade talks with the EU. Investors were spooked by the details of the government’s released negotiating objectives document as the odds of a potential no-deal scenario surged. With officials apparently prepared to abandon talks in June if sufficient progress has not been made GBP exchange rates were dragged into a major slump.
Even if the GfK consumer confidence index shows a modest improvement on the month this may not be enough to outweigh Brexit-based anxiety today.
Eurozone Economic Sentiment Uptick Benefits Euro
Demand for the Euro picked up in response to a surprise improvement in February’s Eurozone economic sentiment index. The improvement from 102.6 to 103.5 suggests that businesses within the currency union largely shrugged off anxiety over Covid-19, at least at the time of the survey. While the odds of another potential European Central Bank (ECB) interest rate cut continued to grow this failed to dent the Euro.
A solid monthly rebound in the German consumer price index could offer EUR exchange rates a fresh leg up this evening.
US Dollar Stumbles Over Risk of Covid-19 Triggering Recession
Even though January’s durable goods orders data saw a smaller contraction than forecast this failed to shore up the US Dollar last night. As former Federal Reserve Chair Janet Yellen warned that a US Covid-19 outbreak could drive the economy into a state of recession USD exchange rates faltered. With the Fed already showing signs of leaning towards further monetary loosening this encouraged investors to price in higher odds of a potential interest rate cut.
Any uptick in January’s personal consumption expenditure core reading may offer the US Dollar a rallying point, though, as the measure remains the Fed’s preferred gauge of inflation.
Higher Wage Growth Shores up Canadian Dollar
An unexpected acceleration in December’s average weekly earnings helped to keep a floor under CAD exchange rates on Thursday. As earnings saw growth of 3.4% on the year this stoked hopes that the Bank of Canada (BOC) could resist any dovish policy moves for longer. However, the upside potential of the Canadian Dollar was still ultimately limited thanks to a sense of market risk aversion.
While no change is expected from December’s monthly gross domestic product any signs of weakening growth momentum in the wider report could weigh on CAD exchange rates.
Smaller Trade Deficit Encourages New Zealand Dollar
Support for the New Zealand Dollar picked up yesterday thanks to the latest set of New Zealand trade data bettering forecasts. While the headline trade balance still dipped into a state of deficit this was not enough to push NZD exchange rates lower, with export volumes seeing a smaller decline than anticipated. Even in the face of ongoing global growth anxiety this allowed the New Zealand Dollar to recover some of its lost ground.
However, with February’s ANZ consumer confidence index looking set to weaken NZD exchange rates may struggle to hold onto a positive footing.
Data Releases
February 28th 07:00 NZD ANZ Consumer Confidence Index (FEB) 121
February 28th 10:01 GBP GfK Consumer Confidence Index (FEB) -8
February 28th 10:30 AUD Private Sector Credit (YoY) (JAN) 2.6%
February 28th 23:00 EUR Germany Consumer Price Index (MoM) (FEB) 0.3%
February 28th 23:30 CAD Gross Domestic Product (MoM) (DEC) 0.1%
February 28th 23:30 USD Personal Consumption Expenditure Core (YoY) (JAN) 1.7%