Australian Dollar (AUD) Wavers as Covid Headwinds Exert Downside
The Australian Dollar (AUD) fell against several peers yesterday as an outbreak of Covid-19 in China continued to weigh upon the currency.
Also denting AUD sentiment were dovish minutes from the Reserve Bank of Australia (RBA), which acknowledged that while inflation had picked up, it was too early to conclude that it was sustainably within the target band.
Into today, a lack of data leaves the ‘Aussie’ to trade on risk sentiment, and further developments in China. If Covid cases continue to rise, AUD could face headwinds.
Pound (GBP) Gains as UK Unemployment Falls
The Pound (GBP) rose against several peers on Tuesday as UK employment data surprised to the upside.
January’s unemployment rate fell to 3.9% as opposed to the 4% expected – the lowest level in two years – while wage growth accelerated at a faster-than-expected pace as well.
Looking ahead, Sterling will likely trade on risk sentiment today, given a lack of domestic data. If peace talks indicate further progress towards achieving a ceasefire, GBP may be buoyed by risk-on support.
Euro (EUR) Firms on Ukraine Optimism
The Euro (EUR) trended up against several peers yesterday as hopes for Russia-Ukraine peace talks reflected positively on the single currency.
EUR strength came despite weaker-than-expected data from Germany as the latest ZEW economic sentiment index plummeted. According to the Centre of European Economic Research, the war in Ukraine and the sanctions against Russia are significantly dampening economic outlook.
The Euro is likely to continue trading on risk sentiment today, as well as US Dollar (USD) dynamics. If USD strengthens, EUR could come under pressure due to the currencies’ strong negative correlation.
US Dollar (USD) Slumps on Risk Flows, PPI
The US Dollar fell through Tuesday’s session as risk-on trading drew support away from the safe-haven dollar.
Contributing towards USD downside, the US Producer Price Index increased by less than expected, as the index for fresh and dry vegetables decreased 9.4% and prices of services remained unchanged. Nevertheless, economists believe the Federal Reserve will go ahead with a 25bps interest rate hike today.
Today’s rate decision will likely influence ‘Greenback’ movement, lending possible USD upside if policymakers strike a hawkish tone.
Canadian Dollar (CAD) Pressured by Oil Price Downturn
The Canadian Dollar (CAD) traded mixed yesterday as falling oil prices sapped support for the commodity-linked ‘Loonie’. Losses were capped, however, as risk-on trading buoyed the currency.
Canadian inflation could affect trading dynamics today, as rising prices will put pressure upon the Bank of Canada (BoC) to tighten monetary policy,
New Zealand Dollar (NZD) Benefits from High Risk Sentiment
The New Zealand Dollar (NZD) climbed overall on Tuesday, as upbeat trading sentiment lent upside.
Into today, New Zealand’s GDP data could boost the ‘Kiwi’ higher still, as the economy is expected to have expanded by 3.2% in Q4 2021.
Data Releases
Mar 16th 22:30 CAD Inflation Rate (Feb) 5.5%
Mar 16th 22:30 USD Retail Sales (Feb) 0.4%
Mar 17th 04:00 USD Fed Interest Rate Decision 0.5%
Mar 17th 04:30 USD Fed Press Conference N/A
Mar 17th 07:45 NZD GDP Growth Rate (Q4) 3.2%