Australian Dollar (AUD) Softens as Export Price Index Improves
The Australian Dollar (AUD) failed to benefit from an unexpected 5.5% uptick in the fourth quarter export prices index, suggesting an improvement in trade conditions.
With the general sense of market risk appetite limited in the face of ongoing Covid-19 fears, there was little appetite for the antipodean currency.
Another lacklustre month of private sector credit growth may add to anxiety over the outlook of the Australian economy, leaving AUD exchange rates on the back foot today.
Pound (GBP) Holds Ground as Risk Appetite Increases
The Pound (GBP) managed to make gains against its rivals last night despite a lack of notable economic data releases.
Instead, Sterling strengthened as the market mood improved following wider equity and commodity market rallies.
Looking ahead, market sentiment and the UK’s coronavirus situation will likely continue driving GBP exchange rates ahead of the weekend.
Euro (EUR) Strengthens as German Inflation Jumps
The Euro (EUR) found fresh traction as January’s German inflation data surpassed forecasts to deliver a strong uptick on both the month and the year.
Even though investors had expected to see the headline inflation rate turn positive once again, the extent of the improvement gave EUR exchange rates a solid boost. With inflation rising to 1% on the year, the case for any imminent European Central Bank (ECB) policy action appeared to diminish, offering the single currency a leg up against its rivals.
On the other hand, the Euro could fall out of favour in the wake of the fourth quarter German GDP product report.
US Dollar (USD) Slides as GDP Proves Weak
The US Dollar (USD) came under pressure last night as the latest gross domestic product data revealed the country’s largest annual contraction since 1946.
Although the fourth quarter growth rate delivered a positive result, this was overshadowed by the extent of 2020’s overall economic contraction. A -3.5% slump in growth over the course of the year gave investors little reason to favour the US Dollar, even though the prospect of upcoming fiscal stimulus measures look set to shore up the economy in the coming months.
A dip in the latest Chicago PMI may add to the bearish mood, keeping USD exchange rates biased to the downside heading into the weekend.
Canadian Dollar (CAD) Fails to Capitalise on Earnings Uptick
The Canadian Dollar (CAD) was unable to benefit from another sharp uptick in average weekly earnings seen in November.
Even with wage conditions appearing to improve, confidence in the outlook of the wider Canadian economy remained relatively muted, in spite of the boost higher levels of consumer spending could bring. A monthly contraction in December’s building permits figure and a wider sense of market risk aversion left the Canadian Dollar lacking in momentum.
On the other hand, if November’s monthly GDP shows steady growth, this could help to give CAD exchange rates a boost.
New Zealand Dollar (NZD) Support Limited by Narrowed Trade Surplus
The New Zealand Dollar (NZD) came under some pressure thanks to a sharper-than-expected narrowing of the December trade surplus.
As the trade surplus narrowed from NZ$290 million to just NZ$17 million last month confidence in the trading outlook naturally diminished. Even so, NZD exchange rates still managed to find some positive footing on the back of weaker risk-sensitive rivals at this stage.
If market sentiment continues to sour over the course of the day, though, this could easily weigh on demand for the ‘Kiwi’.
Data Releases
08:00 NZD ANZ Roy Morgan Consumer Confidence Index (Jan)
11:30 AUD Private Sector Credit (Dec) 0.1%
18:00 GBP Nationwide Housing Prices (Jan) 0.2%
20:00 EUR Germany GDP (Q4) 0%
00:30 CAD GDP (Nov) 0.4%
01:45 USD Chicago PMI (Jan) 58.5