Australian Dollar (AUD) Turbulent as Sentiment Shifts
The Australian Dollar (AUD) saw some volatility yesterday after the latest employment data missed forecasts. AUD slumped but bounced back amid a risk-on market mood.
However, the ‘Aussie’ shed these gains through the European session as market optimism waned, thereby pressuring the risk-sensitive currency.
Reserve Bank of Australia (RBA) Governor Philip Lowe will deliver a speech later this morning. If he sounds less hawkish than he has in recent weeks then the ‘Aussie’ could face further losses.
New Zealand Dollar (NZD) Sheds Gains as Risk Appetite Falters
The New Zealand Dollar (NZD) traded true to its positive correlation with AUD yesterday, initially wavering higher amid the upbeat market mood.
When sentiment soured in the afternoon, the risky ‘Kiwi’ fell alongside the ‘Aussie’.
New Zealand data is still thin on the ground today. As a result, risk appetite and NZD’s correlation with AUD could continue to drive movement in the ‘Kiwi’.
Pound (GBP) Licks Wounds following Wednesday’s Selloff
The Pound (GBP) initially eked out some modest gains during yesterday’s trade, with Sterling striving to recoup some of Wednesday’s losses.
A sharp turnaround in risk sentiment late last night then saw GBP drop against its safer peers and rise against the riskier ones.
Turning to today, a forecast 0.3% decline in UK retail sales this afternoon could see Sterling fall. If sales shrink again in January, following December’s 1% slump, worries about a UK recession could swirl.
Euro (EUR) Firms as Market Mood Sours
Dovish comments from European Central Bank (ECB) policymaker Fabio Panetta initially saw the Euro (EUR) slip yesterday. However, as Panetta is known as the most dovish voice at the ECB, the downside was limited.
The common currency then benefitted from the bearish tilt to markets later on, with the safer Euro rising against its riskier peers.
Today, economists expect a sharp drop in German PPI. This could dampen ECB rate rise bets, thereby potentially denting the Euro.
US Dollar (USD) Enjoys Fresh Fed Bets
The US Dollar (USD) regained the upside yesterday after the latest US producer price index boosted bets on further Federal Reserve interest rate rises.
Producer prices rose 0.7% month over month in January, above forecasts of 0.4% and the highest increase since June. This adds to evidence of stickier-than-expected inflation, which may encourage the Fed to continue its hiking cycle.
Following the recent US data, investors will be listening closely to a selection of speeches from Fed officials today. If policymakers suggest ongoing rate rises, the ‘Greenback’ could climb.
Canadian Dollar (CAD) Directionless amid Lack of Data
The crude-linked Canadian Dollar (CAD) traded without a clear directional bias yesterday amid a lack of economic data and volatility in the oil markets.
This morning, a speech from Bank of Canada (BoC) Deputy Governor Paul Beaudry could impact CAD. With the central bank now likely to have paused its hiking cycle, could hints of future rate cuts create headwinds for CAD?
Data Releases
Feb 17th 07:00 USD Fed Cook Speech
Feb 17th 08:30 AUD RBA Gov Lowe Speech
Feb 17th 09:00 USD Fed Mester Speech
Feb 17th 09:10 CAD BoC Beaudry Speech
Feb 17th 17:00 EUR German PPI MoM (Jan) -1.6%
Feb 17th 17:00 GBP Retail Sales MoM (Jan) -0.3%
Feb 17th 23:30 USD Fed Barkin Speech