Australian Dollar (AUD) Gains Boost from Surge in Home Sales
The Australian Dollar (AUD) benefitted from a sharp surge in the HIA new home sales data for December.
As sales rose 91.8% on the month, significantly surpassing forecasts, this suggests that the housing market returned to a stronger state of health at the end of 2020. This offered the ‘Aussie’ a leg up against its rivals, especially as the general sense of market risk appetite started to pick back up again.
If the Westpac consumer confidence index dips as anticipated in January, however, the mood towards the Australian Dollar could falter.
Pound (GBP) Downside Limited by Improving Market Optimism
The Pound (GBP) found some limited traction last night as the market mood improved and the UK’s vaccine rollout continues at speed.
However, with tightened Covid-19 restrictions looking set to keep economic activity under pressure for the foreseeable future, GBP exchange rates still struggled to make any significant headway.
However, with forecasts pointing towards an improvement in December’s UK inflation rate, the Pound could find a stronger rallying point this evening.
Euro (EUR) Bolstered by Rising German Economic Sentiment
The Euro (EUR) strengthened in the wake of a better-than-expected increase in the German ZEW economic sentiment index.
Confidence in the Eurozone’s powerhouse economy picked up at the start of the year, lifting the index from 55.0 to 61.8 this month. While the pandemic continues to cast a major shadow over the German economy, this improvement gave the single currency a solid boost, encouraging hopes that growth could return to positive territory in the first quarter.
Confirmation that the Eurozone inflation rate remained trapped at -0.3% in December may put a dampener on the Euro tonight, though.
US Dollar (USD) Lacks Support as Safe-Haven Demand Fades
The US Dollar (USD) fell out of favour overnight as the week’s initial bout of safe-haven demand started to fade.
Comments from incoming Treasury Secretary Janet Yellen were not enough to encourage any fresh demand for the US Dollar, with markets having already largely priced in the impact of her words. This left USD exchange rates on a softer footing as worries over the outlook of the global economy temporarily diminished.
Fresh volatility could be in store for the US Dollar over the course of the day as markets await Joe Biden’s inauguration.
Canadian Dollar (CAD) Slips as IEA Lowers 2021 Oil Demand Forecast
The Canadian Dollar (CAD) remained under pressure in the wake of the International Energy Agency’s (IEA) latest monthly report.
As the IEA opted to cut its global demand forecast for 2021, following on from 2020’s drop in demand, the mood of the oil market soured. This left the commodity-correlated Canadian Dollar on a weaker footing against its rivals, with the prospect of another weak year of oil demand weighing on the outlook of the Canadian economy.
While no change in monetary policy is expected from tonight’s Bank of Canada (BOC) rate decision, the Canadian Dollar could still weaken in response to the meeting.
New Zealand Dollar (NZD) Trends Lower in Spite of Business Confidence Improvement
The New Zealand Dollar (NZD) failed to capitalise on a sharp improvement in the fourth quarter NZIER business confidence survey.
Although confidence picked up from -40% in the third quarter to -6%, the ‘Kiwi’ remained on the back foot against its rivals. With doubts over the global growth outlook lingering investors took little encouragement from this improvement in business confidence, with the first quarter still at risk of seeing a fresh decline.
Without a boost from a fresh bout of market risk the New Zealand Dollar may struggle to recover its ground today.
Data Releases
10:30 AUD Westpac Consumer Confidence Index (Jan) 110
18:00 GBP Consumer Price Index (Dec) 0.5%
21:00 EUR Consumer Price Index (Dec F) -0.3%
02:00 CAD Bank of Canada Rate Decision 0.25%
02:00 USD NAHB Housing Market Index (Jan) 86