Australian Dollar (AUD) Slides on Weakening Risk Sentiment
The Australian Dollar (AUD) tumbled against its peers on Friday as market mood turned bearish. Global coronavirus headwinds, alongside soaring price pressures in the US, contributed to a risk-off environment.
In a domestic context, New South Wales recorded its biggest daily death toll, with 29 Covid-related fatalities; in Victoria, authorities pledged to create two ‘medi-hotels’ for Covid patients requiring a ‘lower level of care’.
Into today, the ‘Aussie’ may be affected by Chinese data. China’s economy is expected to have expanded by 3.6% in the final quarter of 2021 – less than in Q3, which could act as a headwind.
Pound (GBP) Supported by GDP Data
The Pound (GBP) gained against several peers at the end of last week, but was capped by domestic political tensions.
November’s GDP data revealed that the UK economy expanded by 0.9% as opposed to the 0.4% expected: lifting GDP 0.7% higher than it was just before the pandemic hit. Encouragingly, growth occurred across all major sectors of the UK economy.
Looking ahead, a lack of UK data today leaves GBP to trade on domestic headlines, more pressure on Boris Johnson to resign may exert pressure upon the Pound.
Euro (EUR) Slumps on US Dollar Strength
The Euro (EUR) fell on Friday as renewed strength in the US Dollar (USD) subdued the single currency on account of the pair’s strong negative correlation. An unexpected deficit in the EU’s trade balance also dampened EUR sentiment.
Also weighing upon the single currency was a speech from European Central Bank (ECB) President Christine Lagarde. Lagarde reiterated that the drivers of inflation are expected to ease over the course of the year, diminishing any hopes of central bank policy tightening.
The Euro is likely to trade on risk sentiment today, in addition to USD dynamics, given a lack of Eurozone data. If the market mood remains bearish, EUR may face further headwinds.
US Dollar (USD) Climbs from Multi-Week Lows as Bond Yields Recover
The US Dollar recouped some of its losses at the end of the week, recovering from oversold conditions.
Despite disappointing retail sales data, the ‘Greenback’ managed to climb from 2-month lows against the majority of its peers. Sales growth contracted by 1.9% in December 2021 rather than stalling as expected.
USD may face pressure today given a lack of significant US data. If global Covid headwinds persist, the US Dollar may find support due to safe-haven demand.
Canadian Dollar (CAD) Rises as WTI Rebounds Towards 2-Month High
The Canadian Dollar (CAD) firmed on Friday as crude oil prices increased above $82 per barrel. CAD investors appeared to shrug off concerns over China’s surge in Covid cases and a potential decline in oil demand.
Tomorrow’s business outlook survey from the Bank of Canada (BoC) may influence trading, lending upside if business sentiment is reported to have improved.
New Zealand Dollar (NZD) Sinks on Subdued Market Mood
The New Zealand Dollar (NZD) tumbled at the end of last week as a risk-off market mood pressured the currency. AUD downside also exerted headwinds, as a result of New Zealand’s strong trading relationship with Australia.
Data Releases
Jan 18th 01:30 CAD BoC Business Outlook Survey N/A