Australian Dollar (AUD) Benefits from Widened Trade Surplus
The Australian Dollar (AUD) recovered some of its lost ground thanks to a surprise widening of January’s trade surplus.
While forecasts had pointed towards a deterioration in trade conditions, the headline surplus instead widened from A$7.13 billion to A$10.14 billion at the start of the year. This suggests that the Australian economy fared better in January than previously thought, even as the latest retail sales data showed a slightly smaller uptick on the month than anticipated.
Even so, if the general sense of market risk appetite fades once again, the ‘Aussie’ could fall out of favour heading into the weekend.
Pound (GBP) Strengthens as UK Construction PMI Improves
The Pound (GBP) continued to benefit from the UK Budget announcement overnight, and found additional support from the US removing trade tariffs on some UK goods.
Sterling also strengthened as the UK construction PMI bettered forecasts in February, surging from 49.2 to 53.5. While the service sector remains the primary driving force of the UK economy, with construction only accounting for a small fraction, this uptick still gave investors fresh cause for confidence.
However, the fading impact of the Budget announcement, and its recent run of gains, could leave the Pound vulnerable to an imminent correction.
Euro (EUR) Weighed Down as Eurozone Retail Sales Slump
The Euro (EUR) slipped as January’s Eurozone retail sales data proved far worse than investors had anticipated.
A -5.9% plunge in sales on the month suggests that consumers took a much more cautious outlook at the start of the year, reflecting the ongoing impact of the Covid-19 crisis. Even though January’s unemployment rate bettered expectations, holding steady at 8.1%, this was not enough to shore up the single currency in the face of this latest evidence of weakening consumer confidence.
However, the mood towards the Euro could improve this evening if German factory orders bounced back in January as forecast.
US Dollar (USD) Softens Even As Factory Orders Leap
The US Dollar (USD) softened in spite of a stronger-than-expected jump in January’s factory orders, which rose 2.6% on the month.
Investors were more concerned by the latest uptick in initial jobless claims, which continue to run at a historically elevated level ahead of the release of February’s non-farm payrolls report.
If non-farm payrolls show a significant increase on the month, this could see the US Dollar return to a stronger footing heading into the weekend.
Canadian Dollar (CAD) Holds Steady on Buoyant Oil Prices
The Canadian Dollar (CAD) remained on an uptrend against many of the majors as oil markets proved buoyant ahead of the latest meeting of OPEC+.
The fourth quarter labour productivity index falling short of forecast did little to weigh on CAD exchange rates as productivity remained negative during the final three months of 2020, clocking in at -2% rather than rising 5% as expected.
A narrowing of January’s trade deficit may encourage additional support for the Canadian Dollar tonight.
New Zealand Dollar (NZD) Support Limited in Absence of Data
The New Zealand Dollar (NZD) saw mixed movement yesterday in the absence of any fresh domestic data releases.
With market risk appetite proving a little more limited than on previous days, the ‘Kiwi’ struggled to make any particular gains against its rivals. However, NZD exchange rates held onto a positive footing thanks to the relative weakness of the US Dollar.
However, any deterioration in market confidence could still see the New Zealand Dollar fall out of favour in the near term.
Data Releases
18:00 EUR Germany Factory Orders (Jan) 0.7%
00:30 CAD Balance of Trade (Jan) C$-1.4 billion
00:30 USD Non-Farm Payrolls (Feb) 182,000