Australian Dollar Sinks as Omicron Fears Persist

Australian Dollar (AUD) Subdued by Soft Business Sentiment

The Australian Dollar (AUD) tumbled on Tuesday as weak business confidence figures weighed upon trading sentiment and the number of Covid-19 cases in New South Wales increased by more than 250.

According to reports, the spike in infections occurred following an alleged outbreak of the virus in a Newcastle nightclub. The 804 cases recorded yesterday were highest daily total the state has seen since October 2.

Westpac consumer confidence will likely influence exchange rates today. The data is expected to show an improvement on November’s figures, potentially buoying AUD exchange rates.

Pound (GBP) Pressured by Further Omicron Concerns

The Pound (GBP) traded in a mixed range yesterday, as UK employment data printed positively but investors remained cautious over Covid and Bank of England (BoE) concerns.

Limiting GBP gains, the British Chamber of Commerce warned that job vacancies remain unfilled despite a high number of employees on payroll. Rumours of ‘Plan C’ coronavirus restrictions also exerted pressure.

UK inflation is likely to be the main driver of Sterling movement today, with a rise to 4.7% expected. Unless the data exceeds forecasts however, Sterling may remain subdued over the likelihood of the BoE leaving interest rates unchanged.

Euro (EUR) Enjoys Limited Gains despite Mixed Market Mood

The Euro (EUR) found some support on Tuesday despite ongoing coronavirus worries, as industrial production in the Eurozone grew in October.

Although Yesterday’s release was marginally below economists’ expectations, it still shows decent expansion following two consecutive months of contraction. Further upside was extended by a wavering US Dollar (USD).

A lack of Eurozone data today leaves the single currency to trade on external factors – if tomorrow’s US interest rate decision betrays a dovish tone, EUR may benefit from USD weakness.

US Dollar (USD) Fluctuates Ahead of Fed

The US Dollar wavered yesterday as USD investors were reluctant to place any aggressive bets ahead of tomorrow morning’s interest rate decision.

The US Producer Price Index (PPI) exceeded forecasts, coming in at 0.8% in November as opposed to 0.5% as expected: elevated price pressures lend credence to the Federal Reserve’s decision to speed up bond-purchase tapering.

Tomorrow’s interest rate decision will no doubt influence ‘Greenback’ trading. if Fed Chairman Jerome Powell announces faster tapering measures as expected, USD will likely enjoy tailwinds.

Canadian Dollar (CAD) Weakens on Dovish BoC News

The Canadian Dollar (CAD) fell through Tuesday’s session despite strong oil prices, as the government announced that it will renew the Bank of Canada (BoC)’s 2% inflation target, while giving the central bank more flexibility to overshoot.

Economists have interpreted the announcement as fairly dovish, pressuring the ‘Loonie’.

Today’s CPI figures will likely affect trading as a stalling of inflation could also sap expectations the BoC will be willing to hike interest rates in the near-term.

New Zealand Dollar (NZD) Trades Level on Mixed Stimuli

The New Zealand Dollar (NZD) fluctuated yesterday as Covid-related downside was countered by a positive tone around the equity markets.

Data Releases

Dec 15th 09:30 AUD Westpac Consumer Confidence Index (Dec) 106
Dec 15th 17:00 GBP Inflation Rate (Nov) 4.7%
Dec 15th 23:30 CAD Inflation Rate (Nov) 4.7%
Dec 15th 23:30 USD Retail Sales (Nov) 0.8%
Dec 16th 03:00 CAD BoC Gov Macklem Speech N/A
Dec 16th 05:00 USD Fed Interest Rate Decision 0.25%

Mathew Andrews