Australian Dollar Falls in Bearish Trade

Australian Dollar (AUD) Slumps in Risk-Off Trade

The Australian Dollar (AUD) weakened on Monday as PMI data showing a surprise contraction in service sector activity dented the currency.

Waning risk appetite then placed additional pressure upon ‘Aussie’, as markets are convinced of an imminent rate hike from the Federal Reserve – such a move would raise borrowing costs at a time when living costs are at a record high.

Looking ahead, Australian CPI data is likely to influence trading today. If inflation increases as expected, AUD may enjoy tailwinds as it buoys hopes the Reserve Bank of Australia (RBA) could hike interest rates later this year.

Pound (GBP) Subdued by Weaker-Than-Expected PMI Data

The Pound (GBP) fell yesterday as UK PMI data missed forecasts. Manufacturing activity fell to 56.9, while the services PMI revealed a slowdown to 53.3.

According to Markit Economics, service sector growth weakened due to ongoing pandemic disruptions and subdued demand in customer-facing parts of the economy; in manufacturing, new order intakes had the worst month in a year.

Into today, data from the Confederation of British Industry (CBI) is expected to print mixed, potentially limiting upside in Sterling.

Euro (EUR) Firms Overall as PMIs Print Mixed

The Euro (EUR) wavered on Monday in the wake of a mixed clutch of PMI data. Business activity fell overall in the Eurozone, albeit only by a small margin.

Manufacturing increased by more than expected, marking the strongest growth in factory activity in 5 months; meanwhile, service-sector activity fell from 53.1 to 51.2 amidst new restrictive measures.

German data from the Ifo institute may influence the single currency today – the business climate indicator is expected to remain unchanged. A lack of downside may lend EUR some support.

US Dollar (USD) Climbs on Weak Risk Sentiment

The US Dollar (USD) benefitted yesterday from a bearish market mood as increased bets of a Fed rate hike indicated greater borrowing costs, and increasing tensions between Russia and Ukraine also spooked markets.

Meanwhile, manufacturing and service-sector activity fell in the US, by more than consensus forecasts. The slowdown in growth was broad-based, with firms reporting softer demand conditions, worsening supply chain disruptions and labour shortages.

USD trading may face pressure today over reduced business activity; or, worsening conditions may exacerbate risk-off tailwinds, supporting the ‘Greenback’. Consumer confidence also looks to decrease, which could further encourage cautious trading.

Canadian Dollar (CAD) Fluctuates on Oil Dynamics, BoC Decision

The Canadian Dollar (CAD) wavered on Monday as WTI crude prices climbed through the early Asian session, before retreating slightly during European trading hours.

Capping losses for the ‘Loonie’, investors speculated over the possibility of a Bank of Canada (BoC) rate hike this week, as December’s inflation hit a 3-decade high.

New Zealand Dollar (NZD) Buoyed despite ‘Aussie’ Weakness

The New Zealand Dollar (NZD) ticked up against the majority of its peers yesterday despite a risk-off market mood and weakness in AUD trading.

The ‘Kiwi’s upward momentum may have been the result of a correction from last week’s lows.

Data Releases

Jan 25th 10:30 AUD NAB Business Confidence (Dec) 10
Jan 25th 10:30 AUD Inflation Rate (Q4) 3.2%
Jan 25th 19:00 EUR Ifo Business Climate (Jan) 94.7
Jan 25th 21:00 GBP CBI Business Optimism Index (Q1) 5
Jan 25th 21:00 GBP CBI Industrial Trends Orders (Jan) 22
Jan 26th 01:00 USD CB Consumer Confidence (Jan) 111.8
Jan 26th 07:45 NZD Balance of Trade (Dec) NZ$343m


Mathew Andrews