Australian Dollar (AUD) Undermined by USD Strength
The Australian Dollar (AUD) got off to a poor start this week as it struggled to attract support in the face of broad-based US Dollar (USD) strength. Strong USD demand weighed heavily on risk appetite and also prevented the China-proxy ‘Aussie’ from accelerating, in spite of China reporting a sharp increase in exports on a yearly basis.
Looking ahead, there may the potential for AUD exchange rates to rally today, if Australia’s latest business confidence figures report an improvement in February.
Pound (GBP) Firms on Bailey Comments
The Pound (GBP) enjoyed modest gains through yesterday’s trading session in response to comments from Bank of England (BoE) Governor Andrew Bailey. Bailey seemed upbeat about the UK’s recovery as he noted economic optimism has risen now that people can ‘see light at the end of the tunnel’ but warned there is still uncertainty due to potential structural changes.
In the absence of any notable UK data releases today, the focus for GBP investors looks to be on the latest UK coronavirus statistics. Will a slowing rate of decline be a reason for concern?
Euro (EUR) Weakens on Surprise Slump in German Industrial Production
The Euro (EUR) slipped on Monday, with the single currency retreating in response to Germany’s latest industrial production release after it revealed a surprise contraction of factory output in January. This left the Euro particularly exposed to pressure from the US Dollar (USD), with the negative correlation in the pairing further weakening EUR exchange rates.
Turning to today’s session, the only data release of note will be the Eurozone’s latest GDP estimate. This is expected to confirm growth in the bloc contracted in the last quarter of 2020, setting up the Eurozone for a double-dip recession this year and likely dragging on the Euro.
US Dollar (USD) Buoyed by Rising Yields
The US Dollar (USD) maintained a positive trajectory at the start of this week’s session, as the currency continued to rise in step with US Treasury yields. The latest strengthening of yields came in response to the news the US Senate had passed President Biden’s $1.9 trillion stimulus package, which further bolstered expectations for a swift US economic rebound.
The stimulus bill will now move back to the Democrat controlled House of Representatives today. This could trigger another uptick in the US Dollar as it is expected to pass easily, paving the way for Biden to sign it into law later this week.
Canadian Dollar (CAD) Dips amid Retreating Oil Prices
The Canadian Dollar (CAD) edged lower on Monday, with the appeal of the oil-sensitive ‘Loonie’ being undermined as WTI crude pulled back from a two-year high to fall back to $65 a barrel.
New Zealand Dollar (NZD) Slips in spite of Auckland Lockdown lifting
The New Zealand Dollar (NZD) trended lower at the start of this week, being undermined by USD demand and a prevailing risk-off mood, which overshadowed the lifting of a week-long lockdown in Auckland.
Data Releases
Mar 9th 10:30 AUD NAB Business Confidence (Feb) 11
Mar 9th 17:00 EUR German Trade Balance (Jan) €12.4bn
Mar 9th 20:00 EUR GDP (Q4) -0.6%