Australian Dollar (AUD) Falls on RBA’s Quantitative Easing Expansion
The Australian Dollar (AUD) fell sharply out of favour in the wake of the Reserve Bank of Australia’s (RBA) decision to expand its quantitative easing programme, with the central bank set to pump an additional A$100 billion into the economy until September.
The move suggests a greater degree of anxiety over the economic outlook, even though the RBA opted to leave interest rates on hold once again. As confidence in the health of the Australian economy diminished, this left AUD exchange rates on the back foot.
If the finalised services PMI shows a loss of momentum on the month, as seen in the initial reading, the bearish mood towards the ‘Aussie’ could increase.
Pound (GBP) Struggles in Absence of Notable UK Data
The Pound (GBP) softened during Tuesday’s European session in the absence of notable data releases or drivers of movement.
The Pound suffered as a result of the US Dollar strengthening and market risk appetite improving, which weakened directionless GBP exchange rates.
Confirmation that the service sector contracted sharply in January could see GBP exchange rates kept on the back foot today.
Euro (EUR) Slides as Eurozone Growth Turns Negative Again
The Euro (EUR) slumped in response to the fourth quarter Eurozone GDP, which proved negative as forecast.
While the quarterly decline in growth was not quite as sharp as markets had anticipated, this still left EUR exchange rates trending lower. As growth slumped -0.7%, this suggests that the currency union remains on track to suffer a double-dip recession, a prospect which encouraged investors to pile out of the single currency.
However, if the Eurozone inflation rate proves positive in January, this may help to put a floor under the Euro this evening.
US Dollar (USD) Strengthens in Spite of ISM Index Miss
The US Dollar (USD) held onto a positive footing against its rivals, despite risk appetite picking up, as US bond yields increased that in turn supported the ‘Greenback’.
A smaller-than-expected uptick in the IBD/TIPP economic optimism index also failed to put much pressure on the US dollar.
An improvement in January’s ADP employment change figure could see the US dollar rally as worries over the US labour market temporarily diminish.
Canadian Dollar (CAD) Bolstered by Oil Market Strength
The Canadian Dollar (CAD) benefitted from a stronger day of trading in oil markets, trending higher against many of the majors.
With oil prices on an uptrend once again CAD exchange rates were encouraged to climb, capitalising on the relative weakness of many of the majors. Although the Canadian Dollar remains sensitive to market risk appetite, this was not enough to prevent any particular gains at this stage.
Growing anticipation ahead of Friday’s raft of Canadian data releases could see the Canadian Dollar coming under some renewed pressure.
New Zealand Dollar (NZD) Trends Lower Ahead of Unemployment Data
The New Zealand Dollar (NZD) saw limited support yesterday as the general sense of market sentiment turned bearish.
In the wake of weaker Chinese manufacturing data and the dovish RBA policy announcement there appeared little appetite for the ‘Kiwi’. With investors bracing for a higher fourth quarter unemployment rate, the appeal of the New Zealand Dollar proved muted at best.
If unemployment rises as forecast in the final three months of 2020 this could see NZD exchange rates shedding further ground over the course of the day.
Data Releases
08:45 NZD Unemployment Rate (Q4) 5.6%
09:00 AUD Services PMI (Jan F) 55.8
20:30 GBP Services PMI (Jan F) 38.8
21:00 EUR Eurozone Inflation Rate (Jan) 0.5%
00:15 USD ADP Employment Change (Jan) 49,000