Australian dollar (AUD) undermined by US-China trade tensions
The Australian dollar (AUD) faced headwinds yesterday as escalating trade tensions between the US and China rattled markets.
Beijing responded to Washington’s latest 10% tariff—implemented on Tuesday—by announcing retaliatory measures, reigniting fears of a prolonged trade war, which could have far-reaching consequences for the Australian economy.
A continued lull in notable domestic data will likely see the focus for AUD investors remain firmly on US-China trade relations today, which may leave the ‘Aussie’ vulnerable to fresh losses.
New Zealand dollar (NZD) pressured by cautious market mood
The New Zealand dollar (NZD) also trended broadly lower on Tuesday, as a deterioration in risk sentiment weighed on demand for the risk-sensitive currency.
This morning saw the publication of New Zealand’s latest jobs report, with a rise in unemployment in the last quarter of 2024 likely to drag on the ‘kiwi’ through today’s session.
Pound (GBP) subdued ahead of BoE rate decision
The pound (GBP) traded sideways during yesterday’s session amid a reluctance from GBP investors to make any aggressive bets in advance of the Bank of England’s (BoE) interest rate decision on Thursday.
While the BoE is widely expected to deliver a 25 basis-point rate cut, there are questions over the tone the bank will strike in its forward guidance.
Sterling may remain trapped in a narrow range today as GBP investors continue to brace for the BoE’s impending rate decision.
Euro (EUR) buoyed by easing tariff fears
The euro (EUR) edged higher on Tuesday, supported by hopes that Donald Trump’s threat to impose tariffs on EU goods may be more bluster than substance.
This follows his swift turnaround on his tariffs on Mexico and Canada, which saw them delayed just before they were due to come into effect on Tuesday.
Coming up, the Eurozone will publish its latest producer price index later today. Expect the euro to come under pressure if December’s index points to a softening of producer price pressures.
US dollar (USD) mixed as Trump rethinks tariff stance
The US dollar (USD) wavered through the first half of yesterday’s session as a result of Donald Trump’s shifting stance on tariffs.
USD exchange rates then came under pressure overnight as the latest US job openings and labor turnover survey suggested the US labour market may be cooling.
Looking ahead, the US dollar may remain under pressure today, if the latest ADP employment figures also point to a softening US labour market.
Canadian dollar (CAD) rallies following Trump tariff turnaround
The Canadian dollar (CAD) strengthened through Tuesday’s trading session amid relief that Trump had postponed his tariffs on Canadian goods.
The reprieve could see movement in the ‘loonie’ driven by oil price dynamics today. If prices continue to soften, CAD exchange rates may come under renewed pressure.
Data Releases
07:45 NZD Unemployment Rate (Q4)
19:30 GBP Services PMI (Jan)
20:00 EUR PPI (Dec)
23:15 USD ADP Employment Change