Australian Dollar (AUD) Firms as China Cuts Interest Rate
The Australian Dollar (AUD) rose against the majority of its peers on Monday despite a lack of significant AU data, as a risk-on market mood buoyed the currency.
Also lending upside support was news that the People’s Bank of China (PBoC) had lowered its key interest rate – a positive sign for the Chinese economy, in turn supporting AUD as proxy currency to China’s economy. Capping gains however, Xi Jinping – President of the People’s Republic of China – warned of challenges to global economic and financial stability.
Into today, a lack of data leaves the ‘Aussie’ to trade on risk appeite: if risk sentiment remains strong, AUD may enjoy tailwinds.
Pound (GBP) Reverses Gains on Lack of UK Data
The Pound (GBP) fell against its peers yesterday as a lack of significant data exposed Sterling to losses. A risk-on mood failed to support GBP, instead lending tailwinds to risk-sensitive rivals.
Also dampening Sterling trading were forecasts of a threefold rise in the number of households experiencing ‘fuel stress’. Britain’s surge in energy prices means that when the price cap rises to £2000 per year in April, 27% of English households will be spending at least 10% of their budget on energy bills.
Today’s employment data will likely influence GBP trading – if unemployment in November remained unchanged rather than improving, Sterling may experience downside.
Euro (EUR) Fluctuates on Mixed Trading Conditions
A lack of EU data applied Euro (EUR) downside on Monday, as the single currency was left to trade on market risk sentiment.
Losses were capped, however, by wavering strength in the US Dollar (USD) – given today’s US national holiday, the ‘Greenback’ attracted limited demand. Consequently, EUR was able to find support on account of the strong negative correlation between the currencies.
Looking ahead, Germany’s ZEW economic sentiment index prints today, and may lend upside if the data reveals an increase on December’s release, as expected.
US Dollar (USD) Subdued by Risk-On Mood on National Holiday
The US Dollar traded in a narrow range yesterday, as stock and bond markets were closed to celebrate Martin Luther King Jr. Day.
The ‘Greenback’ came under pressure from last week’s poor retail, industrial production and consumer sentiment data, as the currency had been trading up at the time on oversold conditions. Nevertheless, USD resisted significant downside on expectations of aggressive policy tightening from the Federal Reserve.
Today’s Empire State manufacturing index is expected to fall, potentially exerting US Dollar downside. Moreover, a risk-on mood could extend losses.
Canadian Dollar (CAD) Ticks Up on Oil Prices
Oil prices eased during Monday’s Asian session, having previously jumped to the highest levels since late October. Prices remain above $80 per barrel, however, buoying the Canadian Dollar (CAD) as analysts predict another rally.
New Zealand Dollar (NZD) Wavers on Chinese Uncertainty
The New Zealand Dollar (NZD) fell against several peers yesterday as a dovish tone from PBoC President Xi Jinping weighed upon the currency.
Data Releases
Jan 18th 17:00 GBP Unemployment Rate (Nov) 4.2%
Jan 18th 17:00 GBP Employment Change (Oct) 125K
Jan 18th 20:00 EUR German ZEW Economic Sentiment Index (Jan) 32
Jan 18th 23:30 USD NY Empire State Manufacturing Index (Jan) 25.7