Australian Dollar (AUD) Slides as Risk Aversion Sweeps Markets
The Australian Dollar (AUD) slumped on Friday, despite stronger-than-forecast PMI results from both Australia and China.
The downside came as a souring market mood sapped the appeal of the risk-sensitive ‘Aussie’. Expectations of more interest rate rises from the US Federal Reserve added to market angst, putting further pressure on AUD.
Barring any deviation from preliminary estimates, Australia’s final retail sales data for December will unlikely cause much movement. Meanwhile, AUD investors may be hesitant ahead of the Reserve Bank of Australia’s (RBA) rate decision tomorrow.
New Zealand Dollar (NZD) Undermined by Risk-Off Trade
The New Zealand Dollar (NZD) found modest success on Friday morning after an above-forecast improvement in New Zealand consumer confidence.
However, as the market mood deteriorated throughout the day – particularly after the US data on Friday night – the riskier ‘Kiwi’ tumbled.
Turning to the week ahead, New Zealand data remains in short supply until the end of the week. As a result, risk appetite could continue to drive NZD exchange rates.
Pound (GBP) Subdued in Wake of BoE Decision
The Pound (GBP) struggled on Friday, with the UK currency still licking its wounds following the Bank of England’s (BoE) dovish rate decision on Thursday.
Sterling was able to make gains against its riskier rivals, however, amid the gloomy market mood.
With no notable UK data due out today, the Pound could trade without a clear direction. GBP investors are likely to focus on domestic British headlines.
Euro (EUR) Rises as ECB Rate Rise Bets Persist
The Euro (EUR) strengthened at the end of last week’s trade. Tailwinds following the European Central Bank (ECB) interest rate decision continued to lift the common currency, while an unexpected monthly rise in producer price inflation added to ECB rate rise bets.
EUR’s negative trading correlation with the US Dollar (USD) may have kept a lid on the Euro’s gains, however, as the US Dollar skyrocketed in the evening.
An expected recovery in German factory orders later today could boost the single currency, although the Euro could trim its gains this evening due to a forecast slump in the Eurozone’s December retail sales.
US Dollar (USD) Roars Higher as Non Farm Payrolls Smashes Forecasts
The US Dollar surged on Friday after the latest US labour market data massively exceeded expectations. The American economy added 517,000 jobs last month – rather than the forecast 185,000 – while the unemployment rate unexpectedly fell from 3.5% to 3.4%.
The shockingly strong report boosted expectations for more rate hikes from the Federal Reserve. This sent the US Dollar soaring and triggered widespread risk aversion.
Today, US data is thin on the ground. As a result, risk appetite may drive most movement in the safe-haven US Dollar.
Canadian Dollar (CAD) Enjoys USD Correlation
The Canadian Dollar (CAD) strengthened on Friday as CAD enjoyed its positive trading relationship with USD.
Amid today’s lack of Canadian economic data, oil price dynamics could influence the crude-linked ‘Loonie’.
Data Releases
Feb 6th 10:30 AUD Retail Sales MoM Final (Dec) -0.6%
Feb 6th 17:00 EUR German Factory Orders MoM (Dec) 2%
Feb 6th 20:00 EUR EA Retail Sales MoM (Dec) -2.5%