Australian Dollar Undermined by Risk Aversion

Australian Dollar (AUD) Slumps on Risk-Off Mood

The Australian Dollar (AUD) dipped against its rivals on Monday as a cautious market mood dampened ‘Aussie’ trading sentiment.

News that several Chinese companies had suspended production of goods and materials was also a blow to AUD investors, as the country is Australia’s main trading partner and had been buoying the Australian Dollar with its purchase of iron ore.

NAB business confidence is likely to boost AUD today if it increases as expected, but if the risk-off mood persists however, the ‘Aussie’s gains may be limited.

Pound (GBP) Gains Capped by Covid Worries

The Pound (GBP) firmed against the majority of its peers yesterday, despite growing concern over the UK’s Omicron situation as cases rose by 50%.

However, Sterling was able to find support on hopes that the acceleration of England’s booster rollout will help limit the need for stricter restrictions.

Looking ahead, the UK’s latest employment data could support GBP exchange rates if it reports unemployment fell in October as expected.

Euro (EUR) Fluctuates on Broad US Dollar Strength

Trade in the Euro (EUR) was mixed through Monday’s session as US Dollar (USD) strength applied pressure alongside central bank policy divergence.

Increasing German wholesale prices did little to support the Euro despite jumping 16.6% on a yearly basis, as the European Central Bank (ECB) has already expressed that it expects inflationary pressures to ease in time. Meanwhile, other central banks have dropped the ‘transitory’ label and begun to accelerate policy tightening measures.

Industrial production in the Eurozone is expected to have risen by 1.2% in October, potentially buoying the single currency today.

US Dollar (USD) Firms as Risk-Off Mood Lends Support

The US Dollar rose yesterday as a risk-off market mood favoured the safe-haven currency.

Also buoying the ‘Greenback’ was ongoing optimism over the Federal Reserve’s monetary policy stance, as Fed Chairman Jerome Powell has primed markets to expect an acceleration of the bank’s bond-buying programme, wrapping it up in March rather than June.

The US PPI release may inspire movement in US Dollar exchange rates today – producer prices are expected to have increased by 0.5% in November, in line with persistent inflation elsewhere.

Canadian Dollar (CAD) Muted on Retreating Oil Prices

The Canadian Dollar (CAD) fell against several peers on Monday as oil prices declined; capping losses though, the Organisation of Petroleum Exporting Countries (OPEC) raised its world oil demand forecast for the first quarter of 2022.

New Zealand Dollar (NZD) Weakens on Low Risk Sentiment

A bullish trading mood subdued the New Zealand Dollar (NZD) yesterday, with the US Dollar set to gain further.
Today, New Zealand’s current account data for the third quarter may exert additional downside, if it reveals a NZ$7.913bn deficit as forecast.

Data Releases

Dec 14th 10:30 AUD NAB Business Confidence (Nov) 23
Dec 14th 17:00 GBP Unemployment Rate (Oct) 4.2%
Dec 14th 17:00 GBP Employment Change (Sep) 228K
Dec 14th 20:00 EUR Industrial Production (Oct) 1.2%
Dec 14th 23:30 USD PPI (Nov) 0.5%
Dec 14th 07:45 NZD Current Account (Q3) NZ$-7.913bn


Tom Hosking