Bets on US-China Trade Deal Signing Boost Australian Dollar
With markets still confident that the signing of a phase one US-China trade agreement is just around the corner the risk-sensitive Australian Dollar remained on a positive footing. Although the full details of the proposed deal have yet to emerge and the agreement is still not finalised investors remained in a generally optimistic mood.
This sense of market confidence could falter in the days ahead if further progress towards a US-China trade deal fails to materialise, leaving AUD exchange rates vulnerable to selling pressure.
Pound Remains Positive in Absence of Brexit Developments
Demand for the Pound remained solid at the start of the week thanks to a lack of fresh UK political developments. Investors maintained a sense of optimism over Brexit last night, even though a significant degree of uncertainty still surrounds the UK’s future relationship with the EU. Growing doubts over the two sides’ ability to reach an agreement during the truncated transition period could see support for GBP exchange rates falter, however.
As long as the risk of a cliff-edge Brexit continues to hang over the UK outlook the strength of the Pound may prove fragile.
Euro Muted in Anticipation of Weak Manufacturing Data
In the face of a persistent mood of market risk appetite the Euro failed to find any particular traction against its rivals. Although a stronger global trade outlook could support the Eurozone economy, reversing at least some of the recent deterioration in manufacturing sector activity, EUR exchange rates slipped lower during Monday’s European session.
With the finalised set of Eurozone manufacturing PMIs expected to confirm another monthly contraction in December the mood towards the single currency is unlikely to improve this week.
Narrowed Goods Trade Deficit Unable to Shore up US Dollar
Even though November’s advance goods trade deficit showed a surprise narrowing this was not enough to give USD exchange rates any boost last night. While the deficit’s narrowing from -66.8 billion to -63.1 billion points towards an improving trade outlook worries over the health of the US economy persisted. With markets in a more risk-positive mood investors saw little incentive to support the safe-haven US Dollar.
Tonight’s consumer confidence index may offer USD exchange rates a rallying point, however, as forecasts point towards a solid uptick on the month.
Canadian Dollar Fails to Benefit from Oil Price Uptick
While oil prices saw a modest push higher overnight this failed to shore up the Canadian Dollar. Lingering worries over the outlook of the Canadian economy kept CAD exchange rates on a weaker footing, even in the face of an improved sense of market risk appetite. After making solid gains over the course of 2019 the Canadian Dollar struggled to find any further upside potential.
Ahead of Thursday’s manufacturing PMI release CAD exchange rates look set to lack any particular sense of momentum.
Hopes of Trade Progress Fuel New Zealand Dollar Demand
Support for the New Zealand Dollar picked up as markets continued to bet on the prospect of an imminent signing off of the phase one US-China trade deal. The relative weakness of the US Dollar also helped to buoy the general sense of investor risk appetite, shoring up NZD exchange rates further.
With no fresh New Zealand data releases scheduled this week, though, the New Zealand Dollar may struggle to hold onto a positive footing against its rivals for long.
Data Releases
January 1st 01:00 USD Consumer Confidence Index (DEC) 128.2