Australian Dollar Dives amid Softening Risk Sentiment

Australian Dollar (AUD) Sinks on Waning Risk Appetite

The Australian Dollar (AUD) fell at the end of last week as a risk-off mood subdued the currency.

Having firmed on Thursday due to upbeat employment data, upside momentum ran out for the ‘Aussie’: downward pressure was exacerbated by news that Western Australia was delaying the reopening of its borders.

Looking ahead, AU PMI data may influence trading today –activity in both the service and manufacturing sector is forecast to have declined in January so far, potentially exerting headwinds.

Pound (GBP) Struggles on Poor Retail Data

The Pound weakened on Friday as retail data disappointed. Sales growth shrank by 3.7% in December rather than the 0.6% contraction expected.

Weighing further upon Sterling sentiment, were suggestions the UK economy is likely to have shrunk over the same period. With the cost of living rising, retail sales are not likely to recover any time soon.

UK PMI data may affect GBP exchange rates today – service sector activity looks to be increasing, while manufacturing could have eased slightly. If the data prints mixed, Sterling could trade in a narrow range.

Euro (EUR) Strengthens Overall as US Dollar Trades Mixed

The Euro (EUR) enjoyed tailwinds at the end of last week as US Dollar (USD) weakness lent upside due to the currencies’ strong negative correlation.

Speeches from European Central Bank (ECB) representative Edourd Fernandez-Bollo and President Christine Lagarde did not seem to have much effect on EUR trading as Lagarde reiterated her benign view of inflation.

Into today, both German and Eurozone PMI could limit any further gains as manufacturing and service sector activity is expected to have fallen this month.

US Dollar (USD) Unable to Recover despite Risk Aversion

The US Dollar wavered on Friday as weakening risk sentiment failed to attract widespread support for the safe-haven currency.

Fears of further Russia-Ukraine conflict and rising price pressures merely helped to cap the ‘Greenback’s losses, while retreating US Treasury yields weighed on USD exchange rates.

US manufacturing and services data could influence trading today. Activity is expected to have declined in both sectors through January, potentially exerting USD headwinds.

Canadian Dollar (CAD) Fluctuates as Retail Data Misses Forecasts

The Canadian Dollar (CAD) slid against several peers at the end of the week, as retail sales accelerated in December by less than expected, with falling oil prices also applying pressure.

New Zealand Dollar (NZD) Falls despite Upbeat Business PMI

The New Zealand (NZD) sank on Friday as risk-off headwinds exerted pressure, despite BusinessNZ PMI data exceeding forecasts. The performance of manufacturing index increased to 53.7 in December from 50.6 the previous month.

Data Releases

Jan 24th 08:00 AUD Markit Services PMI Flash (Jan) 54.8
Jan 24th 08:00 AUD Markit Manufacturing PMI Flash (Jan) 57
Jan 24th 18:30 EUR German Markit Services PMI Flash (Jan) 48
Jan 24th 18:30 EUR German Markit Manufacturing PMI Flash (Jan) 57
Jan 24th 19:00 EUR Markit Services PMI Flash (Jan) 52.2
Jan 24th 19:00 EUR Markit Manufacturing PMI Flash (Jan) 57.5
Jan 24th 19:30 GBP Markit Services PMI Flash (Jan) 53.7
Jan 24th 19:30 GBP Markit Manufacturing PMI Flash (Jan) 57.8
Jan 24th 23:30 USD Chicago Fed National Activity Index (Dec) 0.49
Jan 25th 00:45 USD Markit Services PMI Flash (Jan) 57.1
Jan 25th 00:45 USD Markit Manufacturing PMI Flash (Jan) 57

Mathew Andrews