Australian Dollar (AUD) Muted even as Private Sector Credit Strengthens
The Australian Dollar (AUD) saw limited support even as December’s private sector credit data proved stronger than forecast.
Although growth in credit picked up from 0.1% to 0.3% on the month at the end of 2020, the ‘Aussie’ weakened. With worries over the global growth outlook and the risk of continued Covid-19 disruption lingering, the upside potential of the antipodean currency proved limited.
Even so, confirmation that the manufacturing sector delivered solid growth at the start of the year could help to buoy AUD exchange rates this morning.
Pound (GBP) Slides Thanks to Absence of Fresh Domestic Data
The Pound (GBP) came under fresh pressure heading into the weekend thanks to an absence of any fresh UK data releases.
Doubts over the UK’s economic outlook and the prospect of a prolonged national lockdown both helped to keep GBP exchange rates biased to the downside for the time being.
However, if the finalised January manufacturing PMI shows signs of greater resilience, this could help to put a floor under the Pound.
Euro (EUR) Supported by Positive German GDP Reading
The Euro (EUR) found renewed demand as the fourth quarter German GDP proved slightly better than anticipated.
As the quarterly growth rate clocked in at 0.1%, as opposed to the forecast 0%, this indicated that the Eurozone’s powerhouse economy managed to hold onto some of its momentum in the final months of 2020. This prevented EUR exchange rates from experiencing another day of sharp selling pressure, even though the German economy still looks set to remain under pressure in the near term.
A steady showing from December’s Eurozone unemployment rate could limit the potential for fresh Euro volatility.
US Dollar (USD) Dips while PCE Index Betters Forecast
The US Dollar (USD) failed to benefit from a surprise uptick in the latest Chicago PMI, even as the US economy demonstrated evidence of holding up.
Meanwhile, the latest PCE price index, the Federal Reserve’s preferred indicator for inflation, came in slightly higher than expected for December. This weakened the US Dollar as price growth gave markets some optimism, while Euro strength added to losses due to the negative correlation in USD/EUR.
Any softening in the ISM manufacturing PMI could keep the US Dollar biased to the downside tonight.
Canadian Dollar (CAD) Lifted as Monthly GDP Beats Forecasts
The Canadian Dollar (CAD) rallied on the back of a stronger-than-expected GDP report.
As the growth rate picked up from 0.4% to 0.7% on the month in November this encouraged hopes that the Canadian economy could avoid a sharper fourth quarter slowdown. This gave CAD exchange rates a solid boost ahead of the weekend, especially in the face of the relative weakening of the US Dollar.
A solid January manufacturing PMI may give the risk-sensitive Canadian Dollar an additional boost this evening as worries over the economic outlook diminish.
New Zealand Dollar (NZD) Boosted by Positive Consumer Confidence
The New Zealand Dollar (NZD) benefitted as the ANZ Roy Morgan consumer confidence index improved on the month in January.
Offering fresh evidence of the robustness of the New Zealand economy, the index picked up from 112 to 114. This suggests that sentiment among consumers remains largely optimistic, even in the face of the spread of new strains of the Covid-19 virus and fresh global disruption stemming from the pandemic.
Ahead of the release of the fourth quarter unemployment rate later this week, though, the ‘Kiwi’ could struggle to hold onto its positive footing.
Data Releases
08:30 AUD Manufacturing PMI (Jan F)
20:30 GBP Manufacturing PMI (Jan F) 52.9
21:00 EUR Eurozone Unemployment Rate (Dec) 8.3%
01:30 CAD Manufacturing PMI (Jan) 57
02:00 USD ISM Manufacturing PMI (Jan) 59.5