Australian Dollar (AUD) Shakes Off Disappointing Consumer Confidence Index
The Australian Dollar (AUD) found renewed support yesterday even as January’s Westpac consumer confidence index proved weaker than forecast, dipping from 112 to 107 on the month and indicating renewed concerns over the country’s economic outlook.
AUD exchange rates returned to a stronger footing as the general sense of market risk appetite picked up ahead of Joe Biden’s inauguration as US president.
With forecasts pointing towards a modest improvement in the unemployment rate for December, the Australian Dollar could find additional traction this morning.
Pound (GBP) Trends Higher as UK Inflation Betters Forecast
The Pound (GBP) returned to a stronger footing against its rivals thanks to a better-than-expected uptick in the latest UK inflation data.
As the headline inflation rate picked up from 0.3% to 0.6%, investors found cause for confidence, encouraging bets that the Bank of England (BoE) will not take further policy action in the near future. While doubts over the outlook of the UK economy remain, the Pound was able to still make gains.
However, as January’s CBI business optimism index looks set to fall into negative territory, GBP exchange rates could trend lower once again.
Euro (EUR) Slips on Negative Eurozone Inflation Data
The Euro (EUR) fell out of favour in the wake of confirmation that the Eurozone inflation rate remained trapped in negative territory in December.
With inflationary pressure still failing to show any signs of picking up, the risk of future European Central Bank (ECB) dovishness appeared to remain. This left the Euro on the back foot against many of the majors, especially as improved market sentiment prompted investors to pile into higher-yielding assets instead.
Any signs of dovishness or anxiety over the economic outlook apparent in policymaker comments at the ECB’s January policy announcement could see the single currency shed further ground.
US Dollar (USD) Falters amid Risk-On Trade
The US Dollar (USD) slipped lower against its rivals last night as anticipation for Biden’s inauguration bolstered market risk appetite.
In the absence of safe-haven demand, USD exchange rates returned to a downtrend, even though investors still anticipate fresh fiscal stimulus from the Biden administration.
Another sharp weekly increase in initial jobless claims may encourage the US Dollar to extend its losses tonight.
Canadian Dollar (CAD) Benefits from Signs of BoC Optimism
The Canadian Dollar (CAD) pushed higher across the board even as the Bank of Canada (BoC) opted to leave interest rates on hold.
Although the central bank signalled its intention to keep interest rates at their current level until inflation climbs to its 2% target, this did not put any particular pressure on the Canadian Dollar. Instead markets took encouragement from policymakers’ comments on the economic outlook, which suggested a greater degree of confidence in the prospect of a second quarter rebound.
Even so, an underwhelming ADP employment change reading could weigh on the appeal of the Canadian Dollar.
New Zealand Dollar (NZD) Buoyed by Market Confidence
The New Zealand Dollar (NZD) capitalised on the general improvement in market sentiment, buoyed by investor optimism.
With markets encouraged by the incoming Biden administration and hopes that the Covid-19 pandemic could come under control in the months ahead, the appeal of the ‘Kiwi’ improved.
Ahead of tomorrow’s set of inflation data, however, the New Zealand Dollar may struggle to escape some selling pressure.
Data Releases
11:30 AUD Unemployment Rate (Dec) 6.7%
22:00 GBP CBI Business Optimism Index (Q1) -8
23:45 EUR European Central Bank Rate Decision 0%
00:30 CAD ADP Employment Change (Dec) 18,000
00:30 USD Initial Jobless Claims (16/Dec) 910,000