Headlines
- Sliding Chinese Stocks End ‘Aussie’ Bull Run – AUD dips
- Australia Posts Worst Wage Price Index on Record – ‘Aussie’ consolidates losses
- Fed Rate Comments Support USD – Lacker sees the case for more hikes
- Pound Sterling Demand Remains Limited – EU Referendum in focus
Australian Dollar
After beginning the week on a strong footing, the Australian Dollar’s bullish run against rivals like the US Dollar was challenged on Tuesday as stock and commodity prices dipped.
The ‘Aussie’ came under further pressure after a Federal Reserve official argued the case in favour of the US introducing additional interest rate hikes and domestic data disappointed.
Significantly, Australia published its worst Wage Price Index on record, with a quarterly print of 0.5% and an annual reading of 2.2%. Both figures were lower than their respective forecast outcomes of 0.6% and 2.3%.
The local construction sector also provided cause for concern, with Construction Work Done plummeting -3.6% in the fourth quarter – the steepest rate of contraction recorded since late 2000.
While the Australian Dollar was able to continue trending in the region of a 9-month low against the struggling Pound, the currency did dip back below 0.72 against the US Dollar. The AUD/USD pairing held losses in spite of US Services and Housing data falling short of forecasts. Australian Private Capital Expenditure data might prompt additional AUD movement in the hours ahead.
Sterling
Prominent support for the ‘Leave’ EU referendum campaign and some dovish interest rate related commentary from the Bank of England (BoE) saw the Pound drop to a 9-month low against its Australian counterpart at the start of the week.
Sterling consolidated losses during Wednesday’s European session as Justice Secretary Michael Gove argued that the renegotiation of the UK’s EU membership isn’t legally binding.
Adding to the pressure on the Pound was the Confederation of British Industry’s Reported Sales figure, which slid from 16 to 10 in February.
If the UK’s 4Q growth data provides cause for concern today, the AUD/GBP exchange rate could rally to new highs.
Euro
With the US Dollar strengthening and demand for the Euro easing somewhat on the prospect of the European Central Bank (ECB) expanding stimulus measures, the Euro edged slightly lower on Wednesday.
The common currency held its own against the Australian Dollar, however, with the AUD/EUR exchange rate preparing to close out the European session down from the day’s high of 0.6550.
The German GfK Consumer Confidence survey could weigh on Euro demand later today if it shows the slight decline in sentiment forecast.
US Dollar
US Confidence data may have disappointed on Wednesday but the ‘Greenback’ was still able to rally as a prominent Federal Reserve official lent his support to the prospect of the central bank increasing interest rates.
Lacker commented; ‘I still think prospects for rate increases this year [are] logical’. Given that rate hike expectations had been pushed fairly far back as a result of lacklustre domestic data and global economic concerns, this perspective gave the US Dollar a lift and sent AUD/USD back to 0.71.
The ‘Greenback’ largely held its earlier gains despite the US Markit Services PMI moving into contraction territory in February, with the gauge easing from 53.2 to 50.1.
Today’s speech from the Fed’s James Bullard could prove the catalyst for additional USD movement.
Canadian Dollar
With oil prices reversing previous losses in response to data detailing a smaller-than-forecast stockpile of US crude inventories, the Canadian Dollar registered modest gains against several of its main currency counterparts on Wednesday. The AUD/CAD pairing lost 0.4% but could stage a rebound if today’s speech from the Bank of Canada’s Deputy Governor is dovish in tone.
New Zealand Dollar
Like its Australian counterpart, the New Zealand Dollar drifted lower on Wednesday as demand for higher risk assets eased.
New Zealand’s Net Migration numbers could spark some movement today but market sentiment is likely to be a more significant driver of NZD volatility.
Data Released
Feb 25th EUR German Import Price Index
Feb 25th 08:45 NZD Net Migration (s.a) (JAN)
Feb 25th 11:30 AUD Private Capital Expenditure
Feb 25th 18:00 EUR German GfK Consumer Confidence
Feb 25th 20:30 GBP Gross Domestic Product (4Q)