Australian Dollar Slides on Mixed AU Data

Australian Dollar (AUD) Sinks on AU Trade Balance, Vaccine Pressures

The Australian Dollar (AUD) tumbled against its peers yesterday as the country’s balance of trade missed expectations. Australia’s trade surplus shrank to A$9.423bn in November from A$10.781bn the month previous.

Also subduing the ‘Aussie’ was wavering risk sentiment and headwinds concerning the Covid vaccine rollout. GPs warn of serious failings in the children’s vaccine programme, as demand far surpasses supply.

A lack of significant AU data today leaves the Australian Dollar to trade on risk sentiment. Chinese inflation may affect the ‘Aussie’ due to its role as a proxy for China’s economy: if inflation sinks further from its target range, as expected, AUD could face downside.

Pound (GBP) Muted by Upbeat Fed Expectations

The Pound (GBP) sank on Tuesday as investors engaged in profit-taking ahead of Federal Reserve Chairman Jerome Powell’s testimony. Following a 23-month peak against the Euro, GBP threatened to retreat against its peers, encouraging a sell-off.

Also capping Pound gains, the NHS staffing crisis is ongoing, with NHS England taking measures to secure private hospital resources in order to meet demand.

Into today, Sterling is likely to trade on external factors, given a shortage of significant UK data. Risk sentiment could affect GBP exchange rates, alongside Brexit and Covid dynamics.

Euro (EUR) Trades Mixed on ECB Speeches, USD Dynamics

The Euro (EUR) wavered against its peers yesterday as intermittent strength in the US Dollar exerted downside. Also influencing the single currency were speeches from European Central Bank (ECB) President Christine Lagarde and new governing council member, Joachim Nagel.

Lagarde reassured EU citizens that the central bank is aware of price concerns and takes inflation seriously. Meanwhile, Nagel argued that Eurozone inflation is not entirely due to temporary factors, diverging from the ECB’s typically dovish stance.

The Euro will likely be affected today by US Dollar movement following publication of America’s inflation rate. Industrial production data may also influence EUR, alongside a speech from the ECB’s Andrea Enria.

US Dollar (USD) Wavers on Fed Testimony

The US Dollar (USD) traded mixed on Tuesday as Fed Chairman Jerome Powell gave a testimony before the Senate.

US stock indexes fell ahead of the testimony, although analysts did not expect any surprises: Powell had prepared to reiterate that the Fed will stop higher inflation becoming entrenched, and is committed to achieving maximum employment and price stability.

US inflation is likely to drive USD movement today: the CPI is expected to climb, supporting the Federal Reserve’s intention to hike interest rates through 2022.

Canadian Dollar (CAD) Supported by Rising Oil Prices

The Canadian Dollar (CAD) rose through yesterday’s session as firming oil prices bolstered the commodity-linked currency. WTI crude appreciated in value as traders added around 14.2K contracts to their open interest positions at the beginning of the week.

New Zealand Dollar (NZD) Slumps on Fed Optimism

The New Zealand Dollar (NZD) extended its losses on Tuesday amidst a lack of domestic data. Investors avoided risk-off currencies, anticipating a hawkish stance from the Federal Reserve Bank.

Data Releases

Jan 12th 20:00 EUR Industrial Production (Nov) 0.5%
Jan 12th 23:30 USD Inflation Rate (Dec) 7%
Jan 13th 01:30 EUR ECB Enria Speech N/A


Mathew Andrews