Australian Dollar (AUD) Gains Limited even as Trade Surplus Widens
The Australian Dollar (AUD) saw only limited gains in spite of a surprise widening of December’s trade surplus to $6.78 billion.
However, the overall surplus was driven primarily by a decline in import volumes, rather than any renewed strength in exports. As growth in exports showed a slight slowdown on the month, dipping from 3.3% to 3.0%, this left the ‘Aussie’ exposed to some selling pressure yesterday.
The content of the Reserve Bank of Australia’s (RBA) statement on monetary policy could put further pressure on the Australian Dollar if it offers fresh evidence of dovishness.
Pound (GBP) Bolstered as Bank of England Delivers Economic Outlook
The Pound (GBP) rallied sharply across the board in the wake of the Bank of England’s (BoE) February policy announcement, where they dampened the prospect of negative interest rates by indicating they would need six months to prepare.
Despite the BoE forecast that the UK economy could shrink by as much as 4% in the first quarter, policymakers also indicated they expect the economy to have performed better in the fourth quarter of 2020 than initially feared, helping to encourage GBP exchange rate gains.
With this positive momentum, and continued optimism over the UK vaccine rollout, the Pound could continue to make gains.
Euro (EUR) Trends Lower in Spite of Eurozone Retail Sales Growth
The Euro (EUR) remained on the back foot even as December’s Eurozone retail sales showed a solid improvement on the month as sales picked up 2% at the end of 2020, reversing some of November’s -5.7% decline.
However, the release of the latest European Central Bank (ECB) economic bulletin left the single currency trending lower across the board, with the central bank still appearing cautious in outlook.
With forecasts pointing towards a -1% decline in German factory orders on the month in December the mood towards the Euro could sour further this evening.
US Dollar (USD) Lifted by Lower Level of Initial Jobless Claims
The US Dollar (USD) found a stronger footing last night as the latest initial jobless claims figure proved lower than forecast.
Although unemployment claims remain at an elevated level, markets were encouraged to see that the growth in fresh claims has continued to ease since the start of the year. While the fourth quarter productivity data proved less encouraging, this was not enough to keep the US Dollar from gaining ground.
If January’s non-farm payrolls report proves similarly positive in nature, this could offer USD exchange rates an additional leg up across the board.
Canadian Dollar (CAD) Muted as Risk Aversion Grows
The Canadian Dollar (CAD) failed to find much in the way of support yesterday in the absence of any general surge in market risk appetite.
The appeal of the commodity-correlated currency remained muted, especially in the face of the latest uptrend in USD exchange rates. With oil prices still under pressure due to doubts over the size of global oil demand in the months ahead, the Canadian Dollar faltered.
Greater weakness could be in store for the Canadian Dollar tonight if January’s unemployment rate picks up as anticipated.
New Zealand Dollar (NZD) Unable to Capitalise on Building Permits Uptick
The New Zealand Dollar (NZD) fell out of favour even as December’s building permits figure saw a sharp increase on the month.
A 4.9% increase in building permits, pointing towards a greater level of construction sector resilience, was not enough to keep NZD exchange rates from shedding ground on Thursday. With the US Dollar on a stronger footing once again the appeal of the ‘Kiwi’ proved largely limited in the absence of market risk appetite.
Without the support of fresh domestic data, the New Zealand Dollar could well remain on the back foot heading into the weekend.
Data Releases
11:30 AUD Reserve Bank of Australia Statement on Monetary Policy
18:00 EUR Germany Factory Orders (Dec) -1%
19:30 GBP Halifax House Price Index (Jan) 0.3%
00:30 CAD Unemployment Rate (Jan) 8.9%
00:30 USD Non-Farm Payrolls (Jan) 50,000