Australian Dollar (AUD) Tumbles on Downbeat Market Mood
The Australian Dollar (AUD) sank against its peers yesterday afternoon as risk-off trading conditions reversed CPI-inspired tailwinds.
Australia’s annual inflation rate printed at 3.5% early in the session, coming in 0.3% above forecasts. The release initially bolstered the ‘Aussie’, as it was seen as encouraging the Reserve Bank of Australia (RBA) to tighten monetary policy.
Looking ahead, a lack of data leaves AUD exposed to external pressures today. If risk-off headwinds persist, the Australian Dollar may sink further.
Pound (GBP) Trades Mixed on Market Volatility
The Pound (GBP) wavered through Tuesday’s session as CBI data printed mixed and widespread risk aversion drew support away from the currency.
Business optimism in the UK fell despite forecasts of an increase, as morale was damaged by intense cost and price pressures; meanwhile, industrial trends orders remained unchanged in January rather than falling as expected.
Into today, a lack of UK data means GBP is likely to trade on external factors. As the public await the verdict of Sue Gray’s report into the ‘Partygate’ scandal, Sterling may be dented by political tensions.
Euro (EUR) Subdued by US Dollar Strength
The Euro (EUR) faced headwinds yesterday as US Dollar strength suppressed demand for the single currency. Losses were capped, however, by upbeat German data.
Germany’s Ifo business climate indicator rose by more than expected, recovering from December’s ten-month low of 94.8. Easing supply shortages in industry and fewer delivery bottlenecks in the retail sector caused companies’ expectations to improve significantly.
EUR trading will be directed by risk flows and other external influences today, given a lack of significant data. Persistent USD strength could further subdue the Euro.
US Dollar (USD) Strengthens on High Risk Aversion
The US Dollar rose against its peers on Tuesday as risk sentiment weakened over geopolitical concerns and global inflationary pressures.
Safe-haven flows dominated markets as Russia deployed 100,000 troops and heavy weaponry at the Ukrainian border.
The Federal Reserve’s interest rate decision tomorrow morning is likely to influence trading, buoying USD if the central bank strikes a hawkish tone – the majority of those polled don’t expect a rate hike until March, however.
Canadian Dollar (CAD) Climbs despite Wavering Oil Prices
The Canadian Dollar (CAD) rose yesterday in spite of unsteady oil trading: while WTI futures sank back to the mid-$83.00s, analysts noted that crude could continue to outperform equities in the near-term.
Tomorrow’s interest rate decision from the Bank of Canada (BoC) is highly-anticipated. If rates increase as some economists are forecasting, the ‘Loonie’ may enjoy tailwinds.
New Zealand Dollar (NZD) Slumps on Weak Risk Appetite
The risk-averse New Zealand Dollar (NZD) tumbled against its peers on Tuesday as investors favoured safe-haven assets.
NZ inflation is likely to affect trading tomorrow – if consumer prices rose as expected last quarter, NZD may firm on hopes of policy tightening action from the Reserve Bank of New Zealand (RBNZ).
Data Releases
Jan 26th 23:30 USD Goods Trade Balance Adv (Dec) $-94bn
Jan 27th 01:00 CAD BoC Interest Rate Decision 0.25%
Jan 27th 01:00 CAD BoC Monetary Policy Report N/A
Jan 27th 05:00 USD Fed Interest Rate Decision 0.25%
Jan 27th 05:00 USD Fed Press Conference N/A
Jan 27th 07:45 NZD Inflation Rate (Q4) 5.7%