Australian Dollar (AUD) Falls as Risk Appetite Wanes
The Australian Dollar (AUD) tumbled against several of its peers on Tuesday as a risk-off mood drew support away from perceived riskier assets.
AUD sentiment was further dented as Australia reported its deadliest day of the pandemic so far, with 77 deaths across the country.
Today’s consumer confidence release may drive AUD exchange rates: if sentiment weakens as expected, the Australian Dollar could face headwinds.
Pound (GBP) Sinks on Decline in Real Wage Growth
The Pound (GBP) tumbled yesterday as tailwinds over a lower unemployment rate were nullified by forecasts of worsening wage growth.
For the first time since July 2020, wages declined in comparison with the pace of living costs: economists at both the Learning and Work Institute and the EY Item Club warned that with higher inflation and tax rises on the agenda, salary growth is likely to fall further behind inflation.
UK inflation is likely to direct Sterling trading tomorrow. Soaring inflation may bolster the Pound as pressure mounts on the Bank of England (BoE) to tighten monetary policy.
Euro (EUR) Trades Mixed amid US Dollar Strength
The Euro (EUR) traded in a mixed range against its peers on Tuesday as strength in the US Dollar (USD) exerted downside due to the strong negative correlation between the currencies.
Lending support however, ZEW economic sentiment indexes for both Germany and the Eurozone beat expectations, revealing an improved outlook amongst investors.
Looking ahead, German inflation is likely to influence the single currency today – if the finalised figures reveal an increase as expected, EUR may firm as the European Central Bank (ECB)’s ‘transitory inflation’ narrative becomes less credible.
US Dollar (USD) Climbs on Safe-Haven Demand
The US Dollar surged yesterday following several days of mixed trading. A risk-off mood lent support to the safe-haven currency, alongside expectations of imminent rate hike action from the Federal Reserve.
In light of investors’ expectations regarding the US central bank, the yield on the benchmark 10-year US government bond shot to the highest level since January 2020.
A lack of significant US data today leaves the ‘Greenback’ at the mercy of market sentiment and external factors.
Canadian Dollar (CAD) Supported by Oil Prices
The Canadian Dollar (CAD) rose on Tuesday as WTI crude oil increased in value, heading above $85 per barrel. As tensions rise in the Middle East disrupting supply, the demand-to-supply ratio has gone up.
Canadian inflation could affect trading today. If the country’s CPI climbs as expected, the ‘Loonie’ may find strength on hopes of monetary policy tightening from the Bank of Canada (BoC).
New Zealand Dollar (NZD) Fluctuates as AUD Trends Down
The New Zealand Dollar (NZD) traded in a narrow range yesterday as a lack of data left the currency exposed to losses. AUD downside exerted headwinds given New Zealand’s close trading relationship with Australia.
Data Releases
Jan 19th 09:30 AUD Westpac Consumer Confidence Change (Jan) -0.3%
Jan 19th 17:00 EUR German Inflation Rate Final (Dec) 5.3%
Jan 19th 17:00 GBP UK Inflation Rate (Dec) 5.2%
Jan 19th 20:00 EUR Construction Output (Nov) 3.6%
Jan 19th 23:30 CAD Inflation Rate (Dec) 4.8%
Jan 20th 00:15 GBP BoE Gov Bailey Speech N/A