Australian Dollar Retreats amid US Dollar Rally

Australian Dollar (AUD) Undermined by USD Strength

After largely holding its ground through Wednesday’s trading session, the Australian Dollar (AUD) fell back overnight as the appeal of the risk-sensitive currency was undermined by a resurgent US Dollar (USD). Adding to the pressure on the ‘Aussie’ were ongoing concerns over the rise in global coronavirus cases.

Looking ahead, the direction of AUD exchange rates today is likely to remain tied to market sentiment, potentially leading to more headwinds for the Australian Dollar if the mood continues to sour.

Pound (GBP) Extends Rally on Hawkish BoE

The Pound (GBP) remained well supported through yesterday’s session, with Sterling continuing to enjoy positive flows stemming from Bank of England (BoE) Governor Andrew Bailey’s downplaying of negative rate speculation earlier in the week.

Also bolstering GBP exchange rates was optimism over the UK’s vaccination rollout as the total number vaccinated topped 2.5 million, bolstering hopes that the lockdown could start to be eased next month.

In the continued absence of any notable UK data releases, the focus for GBP investors today is likely to remain on domestic coronavirus developments, as markets remain wary of greater restrictions being placed on parts of the UK.

Euro (EUR) Dented by ECB FX Comments

The Euro (EUR) struck lower against the majority of its peers yesterday as it was undermined by comments from European Central Bank (ECB) President Christine Lagarde, who indicated the ECB is aware of the negative effects of EUR exchange rates.

Also weighing heavily on the single currency were fears over the collapse of Italy’s government as budget disagreements threatened to split apart the country’s coalition government.
In the spotlight today we have Germany’s budget for the coming year. EUR investors will be looking to Europe’s largest economy to commit to a major increase in fiscal spending in order to support Germany’s economic recovery from the coronavirus, potentially leading to some weakness in the Euro if the budget fails to impress.

US Dollar (USD) Firms ahead of Powell Speech

The US Dollar (USD) ticked higher on Wednesday, bolstered by a faster-than-expected rise in inflation and general risk-off tone.

Further boosting the appeal of the US Dollar was a rise in US political uncertainty as Democrats move forwards with efforts to impeach President Donald Trump for inciting last week’s riots at the Capitol.

Turning to today’s session, the focus for USD investors will no doubt be on an upcoming speech from Federal Reserve Chair Jerome Powell later tonight, whose take on whether the Fed should begin tapering its quantitative easing programme could bolster the US dollar further if he is in support of reducing stimulus.

Canadian Dollar (CAD) Muted in Spite of Robust Oil Prices

The Canadian Dollar (CAD) struggled to find momentum on Wednesday, with the commodity-linked ‘Loonie’ unable to attract investors in spite of WTI oil prices striking their best levels in almost a year.

New Zealand Dollar (NZD) Stumbles amid Diminished Risk Appetite

The New Zealand Dollar (NZD) suffered a similar fate to the Australian Dollar (AUD) on Wednesday, with the currency’s initial stability on Wednesday giving way to losses overnight as risk appetite weakened.

Data Releases

January 14th
19:00 EUR German Budget
19:00 EUR German GDP (2020) -5.1%
23:30 USD Initial Jobless Claims (9/Jan) 780,000

Louisa Heath