Australian Dollar Decline Fuelled by Growing Market Anxiety

Australian Dollar (AUD) Softens on Market Risk Aversion

The Australian Dollar (AUD) returned to the back foot on Friday as market risk appetite faded in the face of increasing no-deal Brexit fears.

As US politicians also appeared likely to miss their deadline for the agreement of a fresh fiscal stimulus package, investors piled out of risk-sensitive assets. With doubts over the likelihood of a stronger global economic recovery fading, the ‘Aussie’ struggled to find any particular support.

In the absence of any fresh Australian data releases, AUD exchange rates look set to remain under a degree of pressure.

Pound (GBP) Fades as Brexit Deal Deadline Approaches

The Pound (GBP) was unable to hold onto its earlier sense of bullishness heading into the weekend as anxiety over Brexit picked up once again.

With little time left for the two sides to reach an agreement, investors started to price the possibility of a no-deal scenario back into GBP exchange rates. This saw the Pound trending lower across the board in spite of lingering hopes of an eleventh hour deal and a better-than-expected set of UK retail sales data.

Even so, if December’s CBI distributive trades index shows an improvement on the month, moving closer to positive territory, this could offer GBP exchange rates modest support.

Euro (EUR) Makes Limited Gains on German Business Sentiment Uptick

The Euro (EUR) saw some limited gains as December’s German IFO business sentiment survey proved more optimistic than anticipated as the headline business climate index picked up unexpectedly from 90.9 to 92.1.

This encouraged hopes that the Eurozone’s powerhouse economy could return to a healthier state sooner than expected. However, the recovery of the US Dollar put the single currency under pressure thanks to the negative correlation that exists within the EUR/USD exchange rate, limiting the impact of the data.

Another weak Eurozone consumer confidence index reading could see the Euro come under renewed pressure overnight, though.

US Dollar (USD) Recovers Ground as Risk Appetite Sours

The US Dollar (USD) gained renewed traction during Friday’s European session as market sentiment widely soured.

Growing doubts over the likelihood of an imminent fiscal stimulus package agreement and the uncertainty surrounding Brexit both helped to fuel safe-haven demand.

However, if November’s Chicago Fed national activity index points towards a loss of momentum, the US Dollar could lose some of its support tonight.

Canadian Dollar (CAD) Under Pressure despite Retail Sales Data

The Canadian Dollar (CAD) failed to benefit from a smaller-than-expected loss of momentum in October’s retail sales.

Although sales showed growth of 0.4% on the month, rather than the forecast 0.2%, this was not enough to outweigh disappointment over the deterioration from September’s stronger showing. A positive day for oil prices also failed to shore up CAD exchange rates, with investors maintaining a generally bearish outlook.

A positive showing from the latest new housing price index data could offer the Canadian Dollar a degree of support tonight.

New Zealand Dollar (NZD) Fails to Benefit from Trade Surplus Surprise

The New Zealand Dollar (NZD) fell out of favour with investors even as November’s balance of trade unexpectedly returned to a state of surplus.

While signs point towards a stronger performance for the New Zealand economy in the fourth quarter, NZD exchange rates still shed ground during trading on Friday. Support for the ‘Kiwi’ weakened as market risk appetite soured in response to Brexit anxiety and the lack of progress towards a US fiscal stimulus package agreement.

Unless November’s credit card spending figures show a solid improvement, the New Zealand Dollar looks set to remain under pressure.

Data Releases

13:00 NZD Credit Card Spending (Nov)
22:00 GBP CBI Distributive Trades Index (Dec) -4
00:30 CAD New Housing Price Index (Nov) 0.7%
00:30 USD Chicago Fed National Activity Index (Nov) 0.4
02:00 EUR Eurozone Consumer Confidence Index (Dec) -17.6

Louisa Heath