Australian dollar (AUD) mixed despite upbeat Chinese GDP
The Australian dollar (AUD) got off to a poor start on Friday, with a cautious market mood offsetting any gains stemming from China’s stronger-than-expected GDP figures.
AUD exchange rates then rallied during the European trading session as a pullback in the US dollar (USD) revived market risk appetite.
In the absence of any notable domestic data, movement in the Australian dollar is likely to remain tied to market risk dynamics at the start of this week. If a cautious mood prevails, the ‘Aussie’ is likely to weaken.
New Zealand dollar (NZD) fluctuates amid volatile market mood
The New Zealand dollar (NZD) traded in a wide range at the end of last week as it tracked the swings in market risk appetite.
NZD data is also in short supply today, which is likely to see the ‘kiwi’ also remain vulnerable to shifts in market sentiment.
Pound (GBP) slips on disappointing retail sales data
The pound (GBP) closed last week’s session on a sour note, as disappointing UK retail sales further undermined the country’s economic outlook.
Figures for December revealed an unexpected contraction in sales growth, with retail activity shrinking by 0.3% against expectations of a 0.4% increase.
Turning to this week, a lull in UK economic data at the start of the session could leave the pound to trade without direction.
Euro (EUR) undermined by ECB rate cut bets
Trade in the euro (EUR) was mixed on Friday. While the single currency was supported by risk-off flows, it was also undermined by European Central Bank (ECB) interest rate speculation.
EUR investors are increasingly confident the ECB will deliver a series of rate cuts over the coming months, after the minutes from the bank’s latest meeting showed ECB policymakers debated a 50bps rate cut last month.
Coming up, Germany will publish its latest producer price index later today, with the euro potentially firming if December’s figures point to an acceleration of inflation in the manufacturing sector.
US dollar (USD) flip-flops on Fed comments
The US dollar initially rallied on Friday, with demand for the safe-haven currency strengthening as markets grew increasingly anxious ahead of Donald Trump’s inauguration.
However, the ‘greenback’ then faced significant selling pressure towards the end of the session, following comments from Federal Reserve policymaker Christopher Waller, who alluded to a potential March interest rate cut from the US central bank.
The start of Trump’s second term in office will be closely watched this week, with the President’s policy priorities potentially injecting fresh volatility into the currency market.
Canadian dollar (CAD) firms despite softening oil prices
The Canadian dollar (CAD) ticked higher at the end of last week, with the commodity-linked currency able to shrug off a fall in oil prices thanks to its positive correlation with the US dollar.
The Bank of Canada (BoC) will publish its latest business outlook survey later tonight. If businesses remain reasonably positive in their outlook for the first quarter, the ‘loonie’ may strengthen.
Data Releases
17:00 EUR German PPI (Dec)
01:30 CAD BoC Business Outlook Survey