Australian Dollar (AUD) Climbs on RBA Tapering Expectations
The Australian Dollar (AUD) strengthened during yesterday’s session as some cautious optimism from the Reserve Bank of Australia (RBA) stoked expectations the bank could accelerate the tapering of its stimulus programme.
Also buoying the ‘Aussie’, was China’s latest trade figures, which reported a larger-than-expected rise in import growth in November.
Looking ahead, in the absence of any notable data, the direction of the Australian Dollar today is likely to be primarily driven by market risk appetite, potentially leading to gains if the mood remains broadly upbeat.
Pound (GBP) Subdued by Growing UK Omicron Cases
The Pound (GBP) tumbled on Tuesday on mixed messaging over the spread of the Omicron Covid variant in the UK.
One expert warned that the UK could have more cases of Omicron than some countries it has put on the travel red list; meanwhile, market analysts reassured that the likelihood of stricter controls and lockdowns seems to be minimal.
A lack of UK data today leaves Sterling to trade on external factors – a further increase in Omicron cases could dent Pound sentiment further.
Euro (EUR) Weakens on Mixed Data Releases, Dovish ECB
The Euro (EUR) fell through yesterday’s session as a mixed range of data exerted pressure on the single currency.
German industrial production rose by more than forecast in October, and EU GDP met expectations – on the other hand, ZEW German economic sentiment fell again this month.
The European Central Bank (ECB) policymaker Peter Kazimir also gave a dovish warning to beware of premature monetary policy tightening, weighing upon EUR.
Several speeches by ECB policymakers may influence Euro trading today, any additional dovish comments could place more pressure on EUR exchange rates.
US Dollar (USD) Trends Up despite Risk-On Mood
The US Dollar (USD) rose against the majority of its peers on Tuesday in spite of a prevailing risk-on mood, as bets of Federal Reserve policy action supported the currency. Speaking recently, Chairman Jerome Powell confirmed that the central bank could step up its tapering efforts.
Rising inflation is not only reinforcing the tapering narrative, but has also led investors to price in a Fed rate hike in May 2022. A surge in consumer prices this year reflects resilient demand, fragile transportation networks and shortages of supplies and labour.
JOLTs jobs data is likely to impact USD trading overnight. Job openings are expected to have fallen in October, but only marginally.
Canadian Dollar (CAD) Strengthened by Oil Prices
The Canadian Dollar (CAD) gained yesterday, supported by a risk-on mood as well as higher oil prices. According to the Guardian, traders anticipate that Omicron will not have a severe impact on energy demand.
The Bank of Canada (BoC)’s will deliver its latest interest rate decision overnight. No policy changes are expected this month, but some hawkish forward guidance may buoy the ‘Loonie’.
New Zealand Dollar (NZD) Trades Mixed on Omicron Concerns, Chinese Tailwinds
The New Zealand Dollar (NZD) traded in a mixed range on Tuesday, gaining overall as AUD upside and rising Chinese imports lent support.
Analysts anticipate headwinds ahead for the ‘Kiwi’, given the spread of the Omicron variant and elevated global asset prices.
Data Releases
| Dec 8th 18:15 | EUR | ECB President Lagarde Speech | N/A |
| Dec 9th 01:00 | CAD | BoC Interest Rate Decision | 0.25% |
| Dec 9th 01:00 | USD | JOLTs Job Openings (Oct) | 10.369m |