US Dollar Holds Ground in Spite of Negative Non-Farm Payrolls

Australian Dollar (AUD) Supported by Lingering Global Optimism

The Australian Dollar (AUD) found some traction ahead of the weekend thanks to lingering market optimism over the prospect of a global economic recovery.

While the pace of the economic recovery from the pandemic looks set to take longer than originally hoped, investors were cheered by news that the Pfizer vaccine showed some success against new mutations of Covid-19. This fuelled bets that the rollout of vaccines could still bring the crisis under control in the months ahead, offering the risk-sensitive Australian Dollar a boost.

As long as November’s finalised retail sales figure shows that spending picked up sharply on the month this should help to keep the ‘Aussie’ on a stronger footing.

Pound (GBP) Rallies as UK Approves Moderna Vaccine for Use

The Pound (GBP) pushed higher against many of the majors after the UK approved the Moderna vaccine for use.

With all three Covid-19 vaccines now set to see a rollout across the UK, worries over the economic outlook temporarily diminished, giving the Pound a leg up across the board. Although the country still looks set to suffer a further slowdown in the first quarter the prospect of a greater spread of vaccinations still gave GBP exchange rates cause for confidence.

In the absence of any fresh UK data releases, though, the Pound could see itself falling out of favour with investors once again.

Euro (EUR) Under Pressure Despite Eurozone Unemployment Rate Dip

The Euro (EUR) failed to capitalise on a surprise improvement in November’s Eurozone unemployment rate.

Although the headline unemployment rate dipped from 8.4% to 8.3%, surpassing market expectations, the underlying details of the report still offer some cause for concern. With employment among people under 25 rising sharply on the month, worries over the outlook of the labour market picked up, weighing on the single currency.

With forecasts pointing towards a deeper decline in the latest Spanish industrial production data, the Euro could face further selling pressure this evening.

US Dollar (USD) Losses Limited even as Non-Farm Payrolls Crumble

The US Dollar (USD) lost some of its appeal as December’s non-farm payrolls report delivered a shock decline on the month.

As the US economy shed 140,000 jobs in the final month of 2020, this offered fresh evidence of the weakness of the domestic labour market, far outstripping market forecasts of a modest monthly gain. However, the negative impact of the jobs data was ultimately limited thanks to increased bets that incoming president Joe Biden will expand existing fiscal stimulus measures, offering the economy greater support.

Any softening in consumer inflation expectations may put a dampener on the US Dollar tonight as markets weigh up the odds of further Federal Reserve policy action to come.

Canadian Dollar (CAD) Slips as Unemployment Rate Rises

The Canadian Dollar (CAD) shed ground against its rivals in the wake of the expected uptick in the latest Canadian unemployment rate.

With the labour market shown to have deteriorated further in December, worries over the outlook of the wider economy picked up, dragging CAD exchange rates lower. While the oil market remained generally buoyant in response to the Saudi Arabia production supply cut, this failed to keep the Canadian Dollar from weakening.

Even so, if oil prices continue to trend higher in the region of their 11-month best this could limit the downside potential of CAD exchange rates.

New Zealand Dollar (NZD) Falters in Spite of Market Optimism

The New Zealand Dollar (NZD) came under some pressure on Friday even as the general sense of market risk appetite persisted.

Without the support of any fresh domestic data releases, the ‘Kiwi’ was unable to extend its recent bullish run further, running out of steam in spite of the relative optimism of markets. As disappointing US jobs data failed to drive the US Dollar further out of favour, the potential for any NZD exchange rate rally diminished.

Unless risk appetite picks up again in the near term, the New Zealand Dollar could remain biased to the downside.

Data Releases

11:30 AUD Retail Sales (Nov F) 7%
19:00 EUR Spain Industrial Production (Dec) -3%
03:00 USD Consumer Inflation Expectations (Dec)

Louisa Heath