Australian Dollar (AUD) Stumbles even as GDP Betters Forecast
The Australian Dollar (AUD) softened even though the fourth quarter GDP data bettered forecast.
Although the quarterly growth rate proved stronger than anticipated, clocking in at 3.1% rather than 2.5%, the ‘Aussie’ struggled yesterday. With growth still found to have contracted sharply on the year in the fourth quarter, worries over the health of the Australian economy lingered, limiting the potential for AUD exchange rate gains.
A narrowed trade balance could see the Australian Dollar shedding further ground this morning, even if export volumes hold up solidly on the month.
Pound (GBP) Supported by 2021 Budget Announcement
The Pound (GBP) found some renewed support in the wake of the 2021 UK Budget announcement as the latest Office for Budget Responsibility forecasts pointed towards a ‘swifter and more sustained recovery’ than previously anticipated.
Confirmation of a fresh extension of the furlough scheme also offered a boost to GBP exchange rates, as anxieties over the state of the labour market temporarily diminished.
With forecasts pointing towards the construction PMI returning to growth territory in February, the Pound could find additional support this evening.
Euro (EUR) Muted as Eurozone Service Sector Remains in Contraction
The Euro (EUR) failed to stage a rally last night even as the finalised Eurozone services PMI saw an upward revision from 44.7 to 45.7, indicating contraction in the sector.
With the sector looking set to drag on Eurozone growth for the duration of the first quarter, investors saw limited reason to favour the Euro as the currency union appears on course for a double-dip recession.
Support for EUR exchange rates could weaken further if January’s Eurozone retail sales data weakens sharply in line with the corresponding decline in German sales data.
US Dollar (USD) Defies Softer ADP Employment Change
The US Dollar (USD) pushed higher overnight even as the ADP employment change figure failed to strengthen as forecast.
Although only 117,000 new jobs were added to the economy last month, rather than the 177,000 hoped for, this was not enough to dampen the mood of USD exchange rates.
The resilience of the ISM non-manufacturing PMI and a general deterioration in global risk appetite both helped to shore up demand for the US Dollar.
With forecasts pointing towards an acceleration in growth of factory orders during January, USD exchange rates could find additional support tonight.
Canadian Dollar (CAD) Lifted as Construction Sector Delivers Strong Growth
The Canadian Dollar (CAD) benefitted from a sharp resurgence in January’s building permits data, pointing towards renewed construction sector activity as permits leapt 8.2% on the month, reversing the impact of December’s -4.4% contraction.
Reports that the OPEC+ coalition could keep its current production cuts in place into April also helped to shore up oil markets, offering additional support to the commodity-correlated currency.
An improvement in the fourth quarter labour productivity reading may add to the positive outlook of the Canadian Dollar.
New Zealand Dollar (NZD) Softens despite Solid Building Permits Data
The New Zealand Dollar (NZD) fell out of favour in spite of rising dairy prices and a solid building permits figure.
Even though permits saw growth of 2.1% on the month in January this still represented a loss of momentum from December’s 5.1% growth. As a result, with the wider sense of market risk appetite muted, the mood towards the ‘Kiwi’ generally soured.
Doubts over the resilience of the New Zealand economy could keep NZD exchange rates on the back foot in the near term, and without the support of any fresh New Zealand data releases, the ‘Kiwi’ looks set to remain biased to the downside today.
Data Releases
11:30 AUD Balance of Trade (Jan) $6.5 billion
20:30 GBP Construction PMI (Feb) 51
21:00 EUR Eurozone Retail Sales (Jan) -1.1%
00:30 CAD Labour Productivity (Q4) 5%
02:00 USD Factory Orders (Jan) 2.1%