Australian Dollar Falls Further on Covid-19 Headwinds

Australian Dollar (AUD) Sinks as Covid Situation Worsens

The Australian Dollar (AUD) tumbled on Friday as Omicron cases soared in New South Wales (NSW). Hospital admissions in the state doubled to a record 1,738 in just over a week, with more than 100,000 coronavirus cases recorded in the past three days.

Despite rising infections, Australian business leaders are urging the government to ‘hold their nerve’ against introducing new restrictions, as such measures could damage the economy further.

A lack of significant Australian data today leaves the ‘Aussie’ to trade on external factors. Further shortages of Covid testing equipment amidst high demand could subdue AUD.

Pound (GBP) Fluctuates as Lack of Data Exposes Currency to Losses

Trade in the Pound (GBP) was mixed at the end of last week, as ongoing concerns about the NHS staffing crisis weighed upon Sterling, alongside a forecast cost of living squeeze.

A lack of significant data left the Pound more vulnerable to external factors: however, losses were capped by hawkish predictions for the Bank of England (BoE): a 25bp hike is 80% priced for the February meeting, and the Bank Rate is priced at 1.00% August.

Into today, a scarcity of data means GBP will continue to take cues from Covid dynamics and risk sentiment. Continuing NHS staff shortages could subdue Pound trading.

Euro (EUR) Bolstered by Positive Data, despite ECB Headwinds

The Euro (EUR) found support on Friday from upbeat retail sales and slightly higher-than-expected Eurozone inflation.

Sales in November rose by 1% – the biggest increase since June – as spending increased on both non-food products and food, drinks and tobacco. Meanwhile, a rise in EU inflation could encourage the European Central Bank (ECB) to tighten monetary policy – although policymaker Philip Lane maintains that inflation will soon begin to fall.

Eurozone employment data is likely to influence the Euro’s performance today: if unemployment fell in November as expected, EUR could enjoy support.

US Dollar (USD) Subdued by Disappointing Payroll Data

The US Dollar (USD) fell against several peers at the end of last week, as the US jobs report printed mixed. While unemployment fell by more than expected, non-farm payrolls increased by 199K rather than the 400K forecast in December.

The ‘Greenback’ initially sank in response to the data, as nonfarm employment remains 2.3% below pre-pandemic levels. However, given that both unemployment and wage gains impressed, the downtrend was tempered somewhat.

The US Dollar lacks significant economic stimulus today, and so is likely to trade on external factors. Escalating Omicron fears could inspire a risk-off mood, benefitting the safe-haven currency.

Canadian Dollar (CAD) Wavers as Oil Price Rally Stalls

The Canadian Dollar (CAD) slipped in the second half of Friday’s session, as crude prices stalled. Demand for WTI is likely to weaken now that Russian troops have restored order in Kazakhstan and Libya’s oil production resumes.

Canadian jobs data also printed mixed – unemployment fell marginally and there were more December hires than predicted, but part-time employment fell unexpectedly and wages decreased. The Ivey PMI also missed expectations.

New Zealand Dollar (NZD) Rates Correct from Fortnightly Low

The New Zealand Dollar (NZD) inched up at the end of last week from its lowest level since 21 December. Given the lack of a clear catalyst, it seems to be a technical correction.

Data Releases

Jan 10th 20:00 EUR Unemployment Rate (Nov) 7.2%


Mathew Andrews