Australian dollar (AUD) rises as risk appetite improves
The Australian dollar (AUD) strengthened yesterday, despite a decline in Australian consumer confidence in January, as an improving mood underpinned the risk-sensitive ‘Aussie’.
Reports that Donald Trump’s team is considering gradual tariff increases cheered markets, as incremental tariffs are less likely to damage global growth.
Risk appetite could continue to drive AUD today amid a lack of Australian data. If sentiment shifts back to risk off, the Australian dollar could weaken.
New Zealand dollar (NZD) firms as business confidence improves
The New Zealand dollar (NZD) also gained ground yesterday, with a strong uptick in New Zealand business confidence in the fourth quarter of 2024 lending the ‘kiwi’ support.
With fresh New Zealand data absent from the calendar today, market risk dynamics could determine NZD movement.
Pound (GBP) softens amid tax hike fears
The pound (GBP) weakened during yesterday’s European session, despite UK bond markets remaining relatively calm.
Although the recent turmoil seemed to have subsided, worries about further spending cuts and tax hikes in the UK continued to apply pressure to the pound.
The UK’s consumer price index for December is due for release today. If it shows signs of stubborn inflation, then worries about elevated borrowing costs could spark fresh panic in the UK bond market.
Euro (EUR) buoyed by USD pullback
The euro (EUR) enjoyed modest support yesterday thanks to its negative correlation with a retreating US dollar (USD).
However, a lack of Eurozone data and an improvement in risk appetite both limited the single currency.
Today, Germany’s full-year GDP growth rate for 2024 is out. If the data reports that the Eurozone’s largest economy contracted last year, EUR may face selling pressure.
US dollar (USD) weakens amid Trump tariff hopes
The US dollar declined yesterday following reports that the Trump administration may take a softer approach to tariffs, which cheered markets and deprived USD of safe-haven flows.
The ‘greenback’ attempted to regain ground in the evening, but its recovery was cut short by cooler-than-forecast producer price inflation in December.
Looking forward, the latest US CPI is the focus for USD investors. Could an uptick in inflation see the US dollar test new highs?
Canadian dollar (CAD) subdued as oil prices soften
The crude-linked Canadian dollar (CAD) weakened against its stronger peers yesterday, but held steady elsewhere, as a slight decline in oil prices pressured the currency.
Canadian data remains absent from the calendar today, potentially leaving the ‘loonie’ to trade on oil price dynamics.
Data releases
17:00 GBP Inflation Rate (Dec)
19:00 EUR German Full Year GDP Growth (2024)
20:00 EUR Industrial Production (Nov)
23:30 USD Inflation Rate (Dec)