Australian dollar (AUD) firms in upbeat trade
The Australian dollar (AUD) firmed yesterday, with the currency being supported by positive risk flows.
This came as some of the volatility that followed Trump’s first day in office continued to cool.
In the absence of any notable domestic data, movement in the ‘Aussie’ today is likely to remain tied to market risk dynamics. If market sentiment continues to improve, AUD exchange rates may continue to appreciate.
New Zealand dollar (NZD) undermined by NZ inflation data
The New Zealand dollar (NZD) stumbled on Wednesday as another soft domestic inflation print was seen as increasing the odds of a 50bps interest rate cut at the Reserve Bank of New Zealand’s (RBNZ) next policy meeting.
Looking ahead, the uptick in RBNZ rate cut bets may leave the ‘kiwi’ vulnerable to additional losses today.
Pound (GBP) slips as government borrowing rises
The pound (GBP) was placed on the defensive yesterday, in response to the UK’s latest public borrowing figures.
The data revealed the UK government borrowed far more than expected to balance the books in December and came at a time when GBP investors are already concerned about the rise in borrowing costs.
Looking ahead, in the absence of any notable UK economic releases, the pound may struggle to find direction today.
Euro (EUR) buoyed by USD weakness
The euro (EUR) strengthened during yesterday’s session, supported by its negative correlation with the US dollar (USD).
However, these gains remained limited in light of comments from European Central Bank (ECB) policymaker Yannis Stournaras warning that the bank may need to accelerate the pace of its interest rate cuts if the US imposes tariffs on the Eurozone.
The Eurozone will publish its latest consumer confidence figures later tonight, with the euro potentially facing resistance if sentiment remains downbeat.
US dollar (USD) dented by tariff relief
The US dollar trended broadly lower through Wednesday’s session amid relief that Donald Trump hasn’t gone further with his tariff plans.
So far, the President has only announced that tariffs on China, Mexico and Canada will come into effect at the start of February, rather than the universal tariffs he hinted at on the campaign trail.
Looking ahead, the focus for USD investors will remain firmly on the White House as they hope for more insight into how Trump will roll out his fiscal policies.
Canadian dollar (CAD) pressured by Trump tariff threat
The Canadian dollar (CAD) came under pressure on Wednesday amid concerns over the potential economic impact of the 25% tariffs Trump has threatened to impose on Canadian goods.
Coming up, Canada will publish its latest retail sales figures later tonight. Expect to see the ‘loonie’ weaken if they report sales growth remained weak at the end of 2024.
Data releases
23:30 CAD Retail Sales (Dec)
01:30 EUR Consumer Confidence (Jan)