Australian Dollar (AUD) Strengthens on Upbeat Market Mood
The Australian Dollar (AUD) rose against the majority of its peers yesterday as a prevailing risk-on mood offset a fall in consumer confidence for the month of January.
The Westpac consumer confidence index fell to 102.2, tumbling by more than the 0.3% expected. Nevertheless, the banking corporation reported that the data was ‘relatively solid’ in light of the spread of the Omicron variant.
Looking ahead, today’s employment data ought to influence trading. If the number of individuals employed in Australia rose as expected last month, the ‘Aussie’ may enjoy tailwinds.
Pound (GBP) Recovers Losses Following Inflation Release
The Pound (GBP) edged up on Wednesday against a handful of its peers, following an initial downturn on December’s inflation data. Inflation rose to 5.4% at the end of 2021, exceeding forecasts by 0.3%.
Concerns over living costs are often mitigated by hopes of tighter monetary policy measures – but as markets had already priced in a February rate hike from the Bank of England (BoE), investors were instead left to worry that more UK households face hardship in the months ahead.
A lack of data leaves Sterling to trade on external factors today – if market sentiment remains strong, GBP may be subdued against its perceived riskier peers.
Euro (EUR) Fluctuates on Mixed Data, USD Weakness
The Euro (EUR) wavered midweek, as higher inflation in Germany encouraged investors that the European Central Bank (ECB) may be persuaded to abandon its ‘temporary inflation’ narrative.
Capping gains, however, construction output in the Eurozone increased by considerably less than expected. Nevertheless, USD downside lent some support to the single currency given the currencies’ strong negative correlation.
German PPI and finalised Eurozone inflation are in the spotlight today. If Eurozone CPI increases, investors will likely continue to entertain hopes of monetary policy tightening from the ECB.
US Dollar (USD) Sinks on Strong Risk Appetite
The US Dollar (USD) fell against its peers yesterday as a risk-on trading mood drew support away from the safe-haven currency.
A pullback in US Treasury yields also contributed to the downturn in the ‘Greenback’, although these losses were capped by expectations for an imminent rate hike from the Federal Reserve.
Tonight’s jobs data may lend support to USD, as the number of initial jobs claims is expected to have fallen last week. On the other hand, overall jobless claims are forecast to have risen in the four weeks to 15 January, limiting the upside potential.
Canadian Dollar (CAD) Drops on Mixed Oil Forecasts
The Canadian Dollar (CAD) traded mixed on Wednesday as oil prices hovered around an 8-year high, but were forecast to fall as the Iraq-Turkey pipeline will soon resume service.
Also inspiring volatility, core inflation in Canada exceeded forecasts – while likely boosting bets of a rate hike from the Bank of Canada (BoC) next week, some traders fear persistent cost pressures.
New Zealand Dollar (NZD) Climbs on Risk-On Trading
The New Zealand Dollar (NZD) rose against several currencies midweek as upbeat trading conditions lent support. Upside in the Australian Dollar also buoyed the ‘Kiwi’.
Data Releases
Jan 20th 10:30 AUD Unemployment Rate (Dec) 4.5%
Jan 20th 10:30 AUD Employment Change (Dec) 43.3K
Jan 20th 17:00 EUR German PPI (Dec) 0.8%
Jan 20th 20:00 EUR Inflation Rate Final (Dec) 5%
Jan 20th 22:30 EUR ECB Monetary Policy Meeting Accounts N/A
Jan 20th 23:30 USD Jobless Claims 4-week Average (15 Jan) 217.25K
Jan 20th 23:30 USD Initial Jobless Claims (15 Jan) 220K