US Dollar Weighed Down as Initial Jobless Claims Surge Again

Australian Dollar (AUD) Gains Thanks to Chinese Trade Improvement

The Australian Dollar (AUD) benefitted from a surprise widening of December’s Chinese trade surplus as the ‘Aussie’ commonly functions as a market proxy for sentiment towards the world’s second-largest economy.

With trade strengthening on the month, signs point towards the Chinese economy largely shrugging off the impact of the ongoing pandemic, giving market sentiment an additional boost.

However, a slight slowdown in the growth of home loans could see the Australian Dollar struggle to hold onto a positive footing today.

Pound (GBP) Trends Higher Ahead of UK GDP Report

The Pound (GBP) made gains against many of the majors during Thursday’s European session thanks to optimism over the rollout of the Covid-19 vaccine.

Although the risk of a first quarter growth contraction remains due to ongoing social restrictions, the Pound remained biased to the upside. Markets saw cause for confidence in the longer-term outlook as an increasing number of people in the UK received their first vaccine dose.

Even so, with forecasts pointing towards a negative November GDP reading, GBP exchange rates could face a sharp decline this evening.

Euro (EUR) Weakened by German Growth Contraction

The Euro (EUR) fell largely out of favour as Germany’s GDP report for 2020 showed that the economy experienced its worst year since the financial crisis, shrinking -5% last year.

Even though this decline was not quite as sharp as those seen in some of its rival economies, the Eurozone still appears on track to suffer a double-dip recession before it begins to recover from the pandemic’s impact, weighing on the single currency.

A narrowed Eurozone trade surplus could keep the Euro on the back foot this evening as anxiety over the trade outlook lingers.

US Dollar (USD) Dented by Sharp Initial Jobless Claims Rise

The US Dollar (USD) found limited support last night as jobless claims data showed another sharp weekly increase.

Worries over the health of the labour market continued to mount after the initial jobless claims figure saw an increase of 965,000 on the week. With all signs pointing towards unemployment across the US rising further in spite of the prospect of future fiscal stimulus measures, this left USD exchange rates with little in the way of traction.

Even so, with forecasts pointing towards a relative stabilisation in December’s retail sales data, the US Dollar could see some improvement tonight.

Canadian Dollar (CAD) Maintains Footing in Spite of Oil Price Decline

The Canadian Dollar (CAD) held onto a positive footing overnight even as the oil market showed signs of bearishness.

Oil prices softened thanks to lingering doubts over the global growth outlook and the possibility of demand remaining muted for some months to come. Even so, with the general sense of market risk appetite persisting and US jobs data proving disappointing, the appeal of the Canadian Dollar remained elevated.

In the absence of any fresh Canadian data releases, though, CAD exchange rates look vulnerable to shifts in market outlook.

New Zealand Dollar (NZD) Support Limited by Slowing Building Permits

The New Zealand Dollar (NZD) saw limited upside in the wake of November’s disappointing building permits data.

While the construction sector still showed signs of growth in November, investors were discouraged to find that the pace of growth had started to slow. With new building permits only rising 1.2% on the month, as opposed to the 8.9% seen in September, this limited confidence in the relative strength of the New Zealand economy.

The potential for ‘Kiwi’ losses should be limited ahead of the weekend as long as market risk appetite remains elevated.

Data Releases

08:45 NZD Food Inflation (Dec) 2.5%
11:30 AUD Home Loans (Nov) 0.5%
18:00 GBP Gross Domestic Product (Nov) -5.7%
21:00 EUR Eurozone Balance of Trade (Nov) €26 billion
00:30 USD Retail Sales (Dec) 0%

Louisa Heath