Australian Dollar (AUD) Tumbles on Risk-Off Market Trade
The Australian Dollar (AUD) fell out of favour on Friday as a prevailing risk-off mood swept markets.
AUD exchange rates came under further pressure as January’s private sector credit figures failed to pick up as forecast. With Australian businesses showing signs of increased caution at the start of 2021, the mood towards the ‘Aussie’ naturally soured, leaving AUD exchange rate exposed to significant selling pressure.
Confirmation of a slight loss of momentum within the finalised manufacturing PMI may put the Australian Dollar under additional pressure.
Pound (GBP) Demand Weakens amid Sharp Market Selloff
The Pound (GBP) weakened significantly against the Euro and US Dollar ahead of the weekend as a sharp equity market selloff and risk-off mood weakened Sterling.
Mixed messages from Bank of England (BoE) policymakers also provoked volatility for the Pound, with the central bank appearing split on the subject of inflation.
The volatility in markets and rising government bond yields could continue driving GBP movement at the start of the week, while confirmation in the UK’s manufacturing PMI release that the sector grew in January could offer modest support to Sterling.
Euro (EUR) Finds Support as French Inflation Betters Forecast
The Euro (EUR) benefitted from its status as a safe-haven currency amid risk-off trade and a better-than-expected French inflation rate ahead of the weekend.
As the headline inflation rate only dipped from 0.6% to 0.4% on the year, rather than hitting 0.3%, this encouraged the single currency to gain some ground against its rivals. Even so, the upside momentum of EUR exchange rates was still limited thanks to a downward revision to the finalised fourth quarter French gross domestic product reading.
A softer month of German inflation could keep the Euro from making any particular rally, even though forecasts point towards another positive reading.
US Dollar (USD) Bolstered by Rising Personal Spending and Income
The US Dollar (USD) rallied during Friday’s European session thanks to safe-haven demand following a sharp dip in equity markets, and a solid surge in January’s personal income and spending figures.
Evidence of increased spending power among US consumers encouraged greater confidence in the outlook of the US economy, particularly with signs pointing towards a fresh uptick in inflationary pressure. This helped to offset the impact of a widened advance goods trade balance deficit, even as trade conditions continued to show signs of weakening since the start of the year.
A strong showing from the ISM manufacturing index for February may encourage the US Dollar to extend its gains further tonight.
Canadian Dollar (CAD) Benefits from Stronger Producer Price Indexes
The Canadian Dollar (CAD) found some strength on the back of January’s finalised producer price index figures.
As both the monthly and yearly figure showed a solid improvement, the appeal of the Canadian Dollar improved, even as the wider sense of market risk appetite showed signs of souring. Anticipation ahead of the release of December’s budget balance report also offered a boost to CAD exchange rates.
With February’s manufacturing index forecast to show a slight loss of momentum, the Canadian Dollar may struggle to hold onto a positive footing.
New Zealand Dollar (NZD) Weighed Down by Surprise Consumer Confidence Slip
The New Zealand Dollar (NZD) slumped as February’s ANZ Roy Morgan consumer confidence index unexpectedly weakened.
With consumer sentiment showing signs of softening, the ‘Kiwi’ was left on the back foot against its rivals heading into the weekend. NZD exchange rates saw further pressure as January’s trade balance fell into a state of deficit, reflecting a sharp monthly slowing in export volumes.
As long as doubts over the relative strength of the New Zealand economy remain the mood towards the New Zealand Dollar seems unlikely to improve.
Data Releases
09:00 AUD Manufacturing PMI (Feb F) 56.6
20:30 GBP Mortgage Approvals (Jan) 96,000
00:00 EUR Germany Inflation Rate (Feb) 0.5%
01:30 CAD Manufacturing PMI (Feb) 53
02:00 USD ISM Manufacturing PMI (Feb) 58.9