Australian dollar (AUD) supported by upbeat Chinese data
The Australian dollar (AUD) appreciated at the start of this week, following the release of stronger-than-expected GDP and industrial production figures from China.
This helped bolster risk sentiment and translated into increased demand for the ‘Aussie’, thanks to Australia’s close trading relationship with China.
Looking ahead, AUD movement is likely to be linked to market risk dynamics today, with the Australian dollar set to rise if sentiment remains positive.
New Zealand dollar (NZD) rallies in risk-positive trade
The New Zealand dollar (NZD) also strengthened on Monday amid the improving market mood.
However, the ‘kiwi’ may struggle to sustain these gains today, after data this morning revealed New Zealand’s private sector continued to shrink in December.
Pound (GBP) muted amid warnings of tariff-linked recession
The pound (GBP) was left rangebound at the start of this week, amid warnings that new US tariffs could push the UK into a recession.
Economists warned that the latest tariffs threatened by US President Donald Trump could cost the UK as much as 0.7% of GDP over the next few years.
Sterling sentiment may remain mixed today as the UK’s latest jobs report is expected to show that while unemployment fell in November, so did wage growth.
Euro (EUR) firms despite tariff threat
The euro (EUR) edged higher yesterday, with the single currency’s strong negative correlation with the US dollar (USD) lifting EUR demand, despite the risks posed by Trump’s new tariffs.
Trump has threatened to impose tariffs on European countries opposing the US acquisition of Greenland, with an additional 10% levy set to come into effect in February, and then rising to 25% by June if a deal is not reached.
Coming up, Germany’s latest ZEW economic sentiment index will be in the spotlight today, with the euro poised to climb if morale in the Eurozone’s largest economy continues to improve this month.
US dollar (USD) undermined by tariff concerns
While US markets were closed for Martin Luther King Jr. Day on Monday, a modest ‘sell-America’ bias pulled the US dollar lower.
This was unsurprisingly linked to Trump’s new tariff threat, with investors concerned this will trigger a transatlantic trade dispute and may cause European nations to scale back their purchases of US Treasuries.
The reopening of US markets could inject fresh volatility into the US dollar today as American investors react to Trump’s latest tariffs.
Canadian dollar (CAD) flat as inflation rises
The Canadian dollar (CAD) traded sideways at the start of this week, as an uptick in domestic inflation helped to offset a drop in oil prices.
If oil prices continue to soften, the ‘loonie’ may face an uphill battle today.
Data releases
07:30 NZD Services PMI (Dec)
17:00 GBP Unemployment Rate (Nov)
17:00 GBP Wage Growth (Nov)
20:00 EUR German ZEW Economic Sentiment (Jan)