Australian Dollar
The Australian Dollar was on bullish form yesterday after a run of strong domestic and overseas data. GDP figures for the final three months of 2016 showed that the Australian economy expanded 1.1% on the quarter against predictions of 0.8% and 2.4% on the year against predictions of 2%. Meanwhile, the high-profile Chinese manufacturing PMI rose above forecast to 51.6, showing a faster-than-expected rate of growth for the industry. This all improved the outlook for the Australian economy and investors were therefore quick to buy into the ‘Aussie’.
Australian trade figures are set for release today.
Sterling
AUD/GBP managed to rack up gains of 0.8% during the session yesterday, with the Pound weakened by the latest Markit manufacturing PMI. The UK index was expected to weaken from 55.9 to 55.6 but instead fell to 54.6. Although the score still showed that industry performance was around a two-and-a-half-year-high, investors were concerned that the construction, services and composite PMIs later in the week would also perform poorly.
Investors will be hoping that this evening’s Markit UK construction PMI doesn’t show a similar slowdown to that seen in yesterday’s manufacturing index.
Euro
The Euro was decidedly mixed yesterday, making strong gains versus weaker currencies like the Pound and New Zealand Dollar, but slumping versus the Australian Dollar and US Dollar. Recent headline German data impressed, with unemployment falling by more-than-expected at -14,000 and consumer price growth beating forecasts to accelerate from 1.9% to 2.2%. Although this represented a four-and-a-half-year high, investors were already expecting the European Central Bank (ECB) would soon shoot down any expectations of monetary policy tightening. The consumer price index was largely boosted by volatile energy and food prices, which increased 7.2% and 4.4% respectively.
Preliminary Eurozone consumer price index figures will be released today; markets will be looking for strong growth in core prices, as this will need to keep accelerating if the ECB is to make any changes to monetary policy.
US Dollar
Donald Trump’s speech to Congress was rather light on details regarding his plans for fiscal stimulus, although the President made enough references for the markets to cautiously return to the US Dollar. He claimed he would ask Congress to approve legislation for US$1 trillion in additional spending, but other than that there was no information on his plans. This was enough to improve the outlook for US monetary policy, with the futures market odds on a rate hike in two weeks’ time rocketing up to 68.6%. Optimism was boosted by comments from Federal Reserve official Patrick Harker, who commented that he still sees three hikes as likely and John Williams stating that he believes a hike in March would get ‘serious consideration’.
A speech from Federal Reserve official Lael Brainard is the only notable development on the US economic calendar today.
Canadian Dollar
Aside from weakness against the ‘Aussie’ and the ‘Buck’ yesterday, the Canadian Dollar was on strong form. New figures showed that the nation’s current account recorded its smallest deficit in over five years thanks to strong export figures in the final quarter of 2016. The deficit for the quarter clocked in at -CA$10.73, while the balance on international trade saw a surplus for the first time since 2014 Q3, printing at CA$793 million. Higher crude oil prices were a significant contributor to the improved figures. The overall deficit for the entire year, however, was at an annual high of -CA$67.70.
Canadian GDP figures for 2016 Q4 are set for release just after the turn of midnight tomorrow.
New Zealand Dollar
The New Zealand Dollar slumped yesterday as investors sought more appealing assets. The latest domestic data from Australia and Canada had made the ‘Aussie’ and ‘Loonie’ more appealing risk-correlated currencies than the ‘Kiwi’. The fact the US Dollar was strengthening as demand returned following Trump’s speech did not help either.
Data Released
March 2nd 10.00 USD Fed’s Brainard Speaks at Harvard
March 2nd 11.30 AUD Trade Balance (Australian dollar) (JAN) AU$3.8bn
March 2nd 20.30 GBP Markit/CIPS UK Construction PMI (FEB) 52.2
March 2nd 21.00 EUR Eurozone Consumer Price Index – Core (YoY) (FEB A) 1%
March 3rd 00.30 CAD Quarterly Gross Domestic Product Annualized (4Q) 2%