Australian Dollar Firms as International Borders Reopen

Australian Dollar (AUD) Climbs on Border Reopening Optimism

The Australian Dollar (AUD) rose against its peers yesterday as Australia’s international borders reopened.

From Wednesday, skilled migrants, foreign students and people holding working holiday visas were allowed back into the country even as the Omicron variant promotes caution elsewhere.

Looking ahead, today’s employment data is expected to reveal a significant rise in November hires, potentially boosting the ‘Aussie’ further.

Pound (GBP) Subdued as BoE Expected to Keep Interest Rates on Hold

The Pound (GBP) was muted on Wednesday despite the release of hotter-than-expected UK inflation figures.

Initial upside was lost as investors considered that the Bank of England (BoE) were likely to keep interest rates on hold despite burgeoning price pressures. Also weighing upon Sterling, were some gloomy Covid headlines from the UK.

Today, the BoE interest rate decision will direct Pound movement – GBP may be supported if policymakers hint interest rates might rise early next year.

Euro (EUR) Retains Upside despite Lack of Data

The Euro (EUR) found support yesterday despite a lack of significant EU data, as US retail sales disappointed. Retail trade grew by a meagre 0.3% in November, as opposed to the 0.8% expected.

Poor US data buoys EUR trading, due to the strong negative correlation between the currencies.

The European Central Bank (ECB) will deliver its latest interest rate decision today – if the central bank announces a move to extend asset purchases, EUR will likely face headwinds.

US Dollar (USD) Resists Downside Ahead of Fed Decision

The US Dollar (USD) rose on Wednesday afternoon despite disappointing retail sales figures, as USD investors awaited the Federal Reserve’s interest rate decision.

The central bank was expected to announce a speeding up of bond-purchase tapering given ongoing inflationary pressures and the comparative strength of the US labour market.

Into today, USD is likely to continue trading on fallout from the Fed’s decision – the currency may attract some risk-off support if market sentiment turns bearish.

Canadian Dollar (CAD) Sinks on Canadian Inflation, Oil Prices

The Canadian Dollar (CAD) was subdued yesterday as CA inflation printed at 4.7% in November as expected and WTI oil prices dipped. According to ANZ analysts, oil prices are likely to remain skittish on Omicron fears.

Today’s employment data may extend the ‘Loonie’s losses – private business are forecast to have hired fewer workers in November compared with the month previous.

New Zealand Dollar (NZD) Rises Ahead of Central Bank Decisions

The New Zealand Dollar (NZD) firmed midweek as a cautiously optimistic market mood elevated risk averse currencies. Strength in the Australian Dollar also lent the ‘Kiwi’ upside.

This morning’s GDP figures are likely to influence movement today, with a weaker economy likely exerting headwinds.

Data Releases

Dec 16th 08:00 AUD Markit Services PMI Flash (Dec) 57.4
Dec 16th 08:00 AUD Markit Manufacturing PMI Flash (Dec) 59.4
Dec 16th 09:30 AUD RBA Gov Lowe Speech N/A
Dec 16th 10:30 AUD Unemployment Rate (Nov) 5%
Dec 16th 10:30 AUD Employment Change (Nov) 205K
Dec 16th 18:30 EUR German Markit Services PMI Flash (Dec) 51
Dec 16th 18:30 EUR German Markit Manufacturing PMI Flash (Dec) 56.8
Dec 16th 19:00 EUR Markit Services PMI Flash (Dec) 54.1
Dec 16th 19:00 EUR Markit Manufacturing PMI Flash (Dec) 57.8
Dec 16th 19:30 GBP Markit/CIPS Services PMI Flash (Dec) 57
Dec 16th 19:30 GBP Markit/CIPS Manufacturing PMI Flash (Dec) 57.6
Dec 16th 22:00 GBP BoE Interest Rate Decision 0.1%
Dec 16th 22:45 EUR ECB Interest Rate Decision 0%
Dec 16th 23:30 CAD ADP Employment Change (Nov) 27K
Dec 16th 23:30 USD Initial Jobless Claims (11/Dec) 200K
Dec 16th 00:45 USD Markit Services PMI Flash (Dec) 58.5
Dec 16th 00:45 USD Markit Manufacturing PMI Flash (Dec) 58.5


Tom Hosking