Australian Dollar (AUD) Positive Thanks to IMF’s Positive Outlook
The Australian Dollar (AUD) held onto a largely positive footing against its rivals, benefitting from the International Monetary Fund’s (IMF) latest forecasts.
As the IMF raised its global outlook and expressed optimism over the potential for Covid-19 vaccines to drive a greater economic recovery, this boosted the risk-sensitive ‘Aussie’.
However, the Australian Dollar looks vulnerable this morning with the release of the fourth quarter inflation report.
Pound (GBP) Gains as UK Unemployment Sees Smaller Rise than Forecast
The Pound (GBP) found some traction against its rivals as the UK unemployment rate did not rise quite as far as forecast in November.
While forecasts had pointed towards the unemployment rate rising from 4.9% to 5.1%, it instead clocked in at 5.0%, suggesting a slightly smaller deterioration in the health of the labour market. A stronger showing from the accompanying average earnings figures also helped to shore up the Pound last night, encouraging hopes of greater consumer spending to come.
In the absence of any fresh UK data releases, however, GBP exchange rates could soon see renewed selling pressure.
Euro (EUR) Dragged Down by Latest Italian Political Uncertainty
The Euro (EUR) remained on a weaker footing during Tuesday’s European session, even as German exporters showed a greater degree of optimism, stemming from the reduction in global uncertainty, the resolution of Brexit, and the new US presidency.
Instead, fresh political uncertainty it Italy put a dampener on EUR exchange rates thanks to the resignation of Prime Minister Guiseppe Conte.
Any further deterioration in the German Gfk consumer confidence index could expose the Euro to additional selling pressure this evening.
US Dollar (USD) Softens as Risk Appetite Increases
The US Dollar (USD) failed to capitalise on a better-than-expected CB consumer confidence index reading, which climbed from 87.1 to 89.3 in January, suggesting a wide improvement in sentiment among consumers.
Instead, the US Dollar came under pressure as the general sense of market risk appetite picked back up in the wake of the latest IMF economic forecasts.
However, a steady showing from December’s durable goods orders figure may offer the US Dollar some degree of support tonight.
Canadian Dollar (CAD) Lacking in Support as Oil Market Action Limited
The Canadian Dollar (CAD) found itself lacking in any meaningful direction overnight as the oil market proved rather mixed in mood.
With oil prices making no major gains or losses on the day, the potential for any major Canadian Dollar moves was limited. Although market risk appetite saw an improvement on the back of a greater sense of IMF optimism, this was not enough to give CAD exchange rates any boost at this stage.
Without the support of a bullish oil market the Canadian Dollar could struggle to make much headway in the near term.
New Zealand Dollar (NZD) Strengthens on Improved Services PMI
The New Zealand Dollar (NZD) held onto a stronger footing yesterday as December’s services PMI saw an improvement on the month.
As the PMI picked up from 46.7 to 49.2, this suggests that the service sector started to recover some of its lost ground in the final month of 2020. While this was not quite as sharp an improvement as forecasts had suggested NZD exchange rates pushed higher across the board all the same.
Growing anticipation ahead of the release of the latest New Zealand trade data could put the ‘Kiwi’ under some pressure.
Data Releases
11:30 AUD Inflation Rate (Q4) 0.7%
18:00 EUR Germany GfK Consumer Confidence Index (Feb) -7.9
00:30 USD Durable Goods Orders (Dec) 0.9%