Australian dollar (AUD) weakens amid RBA rate cut bets
The Australian dollar (AUD) softened yesterday amid growing bets that the Reserve Bank of Australia (RBA) will soon start considering cutting interest rates.
Expectations have been shifting since Wednesday’s cooler inflation data, with four major Australian banks now anticipating an RBA rate cut as early as February.
Australia’s producer price index for the fourth quarter is out today. If factory inflation cooled, as expected, then this could further stoke RBA rate cut bets and thereby dent the ‘Aussie’ dollar.
New Zealand dollar (NZD) slips as business confidence slumps
The New Zealand dollar (NZD) also faltered yesterday as a surprisingly sharp deterioration in New Zealand business confidence this month put pressure on the ‘kiwi’.
Turning to today, a lack of economic data could leave NZD exposed to risk appetite. Will a souring market mood see the New Zealand dollar decline?
Pound (GBP) quiet as data thin on the ground
The pound (GBP) was mostly muted yesterday amid an ongoing absence of UK economic data.
However, easing UK government borrowing costs and recently announced pro-growth measures from Chancellor Rachel Reeves helped to provide the pound with some support.
The lack of UK economic data persists into today’s session, potentially leaving the pound to move without a clear trajectory through to the end of the week.
Euro (EUR) fluctuates amid ECB decision
The euro (EUR) was choppy yesterday, initially weakening as the Eurozone’s fourth-quarter GDP figures showed that the bloc’s economy unexpectedly stalled at the end of last year.
EUR was then able to shrug off a widely expected interest rate cut from the European Central Bank (ECB). A data-dependent stance from the ECB helped to cushion the euro, while a falling US dollar (USD) also aided the common currency.
Germany’s preliminary inflation rate could impact EUR this evening. If inflation in the Eurozone’s largest economy held steady in January, this could dampen bets on further ECB rate cuts.
US dollar (USD) muted despite hawkish Fed
The US dollar was initially steady yesterday, with USD struggling to gain ground despite some hawkish forward guidance from the Federal Reserve.
The ‘greenback’ then faced some selling pressure in the evening as the US GDP results for the fourth quarter of 2024 showed a steeper-than-expected slowdown in economic growth.
Looking forward, the latest US core PCE price index is the focus. If the Fed’s preferred measure of inflation shows that price pressures remain stubborn, USD could climb.
Canadian dollar (CAD) wavers as oil rises and USD dips
The Canadian dollar (CAD) faced volatility yesterday evening as a rise in oil prices and the drop in the US dollar both impacted the ‘loonie’.
Tonight, Canada’s latest GDP figures are due out. Could weak economic growth see the Canadian dollar stumble?
Data releases
10:30 AUD PPI QoQ (Q4)
23:00 EUR German Inflation Rate (Jan)
23:30 CAD GDP (Nov)
23:30 USD Core PCE Price Index (Dec)