Australian Dollar Makes Fleeting Gains on Falling Unemployment Rate

Australian Dollar (AUD) Limited in Spite of Lower Unemployment Rate

The Australian Dollar (AUD) only saw some short-lived gains on the back of January’s better-than-expected unemployment rate.

While the unemployment rate fell from 6.6% to 6.4% at the start of the year, the ‘Aussie’ failed to gain a sense of bullishness. As the labour market report showed a decline in the participation rate, meaning that fewer Australians are now active within the labour market, this cast a fresh cloud of AUD exchange rates.

Even so, the Australian Dollar could find some fresh gains this morning if January’s retail sales deliver a sharp bounce as forecast.

Pound (GBP) Continues to Benefit from Covid-19 Vaccine Optimism

The Pound (GBP) found another wave of support overnight as optimism over the UK’s rollout of Covid-19 vaccines picked up once again.

With the vaccination programme proceeding at a solid pace across the UK, hopes continue rising that the economy could start to recover from the pandemic sooner rather than later. Speculation that lockdown conditions could see some loosening in the near future also gave the Pound cause for confidence, with investors hopeful for a return to normal in the months ahead.

However, GBP exchange rates look vulnerable ahead of the release of the latest UK services PMI and its expected contraction.

Euro (EUR) Weighed Down by Dovish European Central Bank Minutes

The Euro (EUR) slipped against its rivals in the wake of the release of the European Central Bank’s (ECB) latest set of meeting minutes.

Although the dovish nature of the minutes came as no surprise, the single currency still weakened in response to the release. With the central bank confirming its intention to keep monetary policy looser for the foreseeable future, investors saw little reason to buy into the Euro, even as policymakers expressed ‘cautious optimism’ over the prospect of a Eurozone economic recovery.

Another solid showing from February’s Eurozone manufacturing PMI may help to shore up the single currency tonight.

US Dollar (USD) Appeal Limited by Softer Manufacturing Index

The US Dollar (USD) fell out of favour last night even as the Philadelphia Fed manufacturing index bettered forecasts, although the index still showed a decline on the month.

The mood towards the US Dollar also soured as the week’s initial jobless claims figure saw an unexpected increase, highlighting the continued weakening of the US labour market.

If the Markit manufacturing PMI shows another solid month of sector expansion, though, this could offer USD exchange rates a boost ahead of the weekend.

Canadian Dollar (CAD) Weakened by Sharp Employment Decline

The Canadian Dollar (CAD) lost further ground against its rivals thanks to the sharp decline shown by January’s ADP employment change figure.

News that the Canadian economy had shed -231,200 jobs in the first month of 2021 gave markets fresh incentive to shun the Canadian Dollar. With the labour market experiencing even greater deterioration than anticipated, worries over the health of the wider Canadian economy picked up, especially with the oil market turning flat.

The mood towards the Canadian Dollar looks set to deteriorate further tonight, with December’s retail sales expected to show a sharp monthly decline.

New Zealand Dollar (NZD) Trends Lower Ahead of Producer Price Index

The New Zealand Dollar (NZD) failed to find support even in the face of the latest signs of US economic weakness.

Although the US Dollar weakened, the risk-sensitive ‘Kiwi’ slipped in the absence of any fresh New Zealand data releases. With the general sense of market risk appetite still muted, there was little room for NZD exchange rate gains.

Any weakness in the fourth quarter producer price index figures could see the New Zealand Dollar shedding further ground.

Data Releases

08:45 NZD Producer Price Index (Q4)
11:30 AUD Retail Sales (Jan) 2%
20:00 EUR Eurozone Manufacturing PMI (Feb) 54.3
20:30 GBP Services PMI (Feb) 41
00:30 CAD Retail Sales (Dec) -2.5%
01:45 USD Manufacturing PMI (Feb) 58.5

Louisa Heath