Australian Dollar (AUD) Subdued by Dovish RBA Speech
The Australian Dollar (AUD) tumbled against several peers midweek, as dovish comments from RBA Governor Philip Lowe weighed upon the currency.
Governor Lowe cautioned that the end of quantitative easing measures doesn’t mean a cash-rate rise is imminent, adding that it’s plausible the first rate rise is a year or longer away. Later in the day, a bearish market mood exerted additional pressure on the ‘Aussie’.
Into today, Australia’s trade balance data may affect AUD exchange rates – the country’s surplus is expected to increase to A$13bn, lending potential tailwinds.
Pound (GBP) Trades Mixed on BoE Uncertainty
The Pound (GBP) wavered on Wednesday despite widespread confidence that the Bank of England (BoE) will hike interest rates later today.
GBP traders were hesitant to place bullish bets as it remains possible that BoE Governor Andrew Bailey could strike a less-than-hawkish tone. Several economists predict that the central bank may opt for modest tightening measures ahead, disappointing those hoping for aggressive action.
Furthermore, the Pound could plunge if the bank lives up to its reputation as an ‘unreliable boyfriend’ and shocks markets by leaving rates on hold this month.
Euro (EUR) Supported by Rising EU Inflation
The Euro climbed yesterday as inflation in the Eurozone reached a record 5.1% in January, exceeding forecasts of a drop to 4.4% and up from 5%.
The hotter-than-expected release spurred hawkish European Central Bank (ECB) bets, as investors speculate that the bank may be forced to concede that inflation is not transitory.
The central bank is expected to keep interest on hold today, but could strike a hawkish tone given Wednesday’s events. Eurozone money markets are now pricing in a rate hike of 30bps by December this year.
US Dollar (USD) Pressured by Weak ADP Data
The US Dollar (USD) began Wednesday’s session trending down due to an ongoing selling bias following last week’s high exchange rates.
The ‘Greenback’ then encountered further headwinds as January’s ADP employment data revealed that new hires in the private sector fell by 301,000, rather than increasing as expected.
The ISM non-manufacturing PMI release may influence USD trading today. Will a slowing of US service sector activity at the start of 2022 weigh on the Euro?
Canadian Dollar (CAD) Struggles to Retain Oil-Based Gains
The Canadian Dollar (CAD) found brief support midweek as WTI crude prices ticked to a fresh 7-year high on recommendations of a 400K barrel-per-day output hike.
Nevertheless, the ‘Loonie’s’ gains were short lived as risk aversion weighed upon the currency, causing CAD exchange rates to dip back down.
New Zealand Dollar (NZD) Sinks on Risk-Off Mood
The New Zealand Dollar (NZD) edged lower against its peers yesterday as a lack of data exposed the currency to risk-off headwinds.
Data Releases
Feb 3rd 08:00 AUD Markit Services PMI Final (Jan) 45
Feb 3rd 10:30 AUD Balance of Trade (Dec) A$13bn
Feb 3rd 18:55 EUR German Markit Services PMI Final (Jan) 52.2
Feb 3rd 19:00 EUR Markit Services PMI Final (Jan) 51.2
Feb 3rd 19:30 GBP Markit/CIPS Services PMI Final (Jan) 53.3
Feb 3rd 22:00 GBP BoE Interest Rate Decision 0.5%
Feb 3rd 22:45 EUR ECB Interest Rate Decision 0%
Feb 3rd 23:30 USD Initial Jobless Claims (29/Jan) 245K
Feb 4th 00:45 USD Markit Services PMI Final (Jan) 50.9
Feb 4th 01:00 USD ISM Non-Manufacturing PMI (Jan) 59.5