Australian Dollar Could Extend Gains vs. Euro, US Dollar

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  • Australian data limited – AUD to react to global economic developments
  • UK employment figures ahead – Rising wage growth could boost GBP
  • ECB meeting looms – Dovish stance would weaken EUR
  • US Q4 GDP in focus – QoQ growth expected to ease from 3.2%

Australian Dollar (AUD) Exchange Rates End Week Higher

The Australian Dollar closed out last week trading higher against the US Dollar and Euro, but little changed against the Pound.

Although Australia’s latest employment figures showed an unexpected increase in the unemployment rate, the ‘Aussie’ derived support from the fact that the nation added an impressive number of positions.

With very little Australian data due for publication next week, Australian Dollar (AUD) exchange rates will fluctuate in response to global economic developments and general risk appetite.

The one domestic report with the potential to spark AUD volatility – the Westpac Leading Index – is due out on Wednesday but no forecasts have been issued.

Pound Sterling (GBP) Exchange Rates Could Jump on Sturdy UK Jobs Data

Although the UK’s latest retail sales figures disappointed, Pound Sterling (GBP) exchange rates generally strengthened last week, with the British currency firming against the Euro and hitting post-referendum highs against the US Dollar.

Whether or not the Pound is able to maintain this momentum is largely down to the UK’s key employment figures, due on Wednesday.

While a sturdy employment change number would be good news, investors will be more concerned with average weekly earnings numbers. If wage growth rises, and moves closer to the current level of inflation, Sterling could rally.

Other UK data to watch out for includes public sector net borrowing numbers and the Q4 growth estimate.

Will Euro (EUR) Exchange Rates Fall after ECB Rate Announcement?

There is the potential for Euro (EUR) exchange rates to fall following the upcoming European Central Bank (ECB) interest rate decision.

The latest Eurozone inflation figures confirmed that consumer price pressures remain far below the ECB’s target levels. If policymakers respond to the report by maintaining a dovish attitude on the subject of tightening monetary policy, the Euro may record broad-based losses.

However, any EUR weakness could be limited if the week’s other big Eurozone news, including the German and Eurozone ZEW economic sentiment surveys, preliminary manufacturing and services PMIs and the German IFO business confidence measures, print positively.

US Dollar (USD) Exchange Rates Down before Durable Goods Data

The US Dollar (USD) hasn’t been having a great run recently, and demand for the currency wasn’t improved by the University of Michigan Sentiment index falling from 95.9 to 94.4.

The Current Conditions measure, meanwhile, fell from 113.8 to 109.2.

Next Friday’s stats will be the most influential in terms of US Dollar movement and are expected to show a slowing in durable goods orders growth and an easing in QoQ expansion in the last quarter of 2017.

Canadian Dollar (CAD) Exchange Rates to Keep Struggling on NAFTA Woes

Ongoing concerns about the North American Free Trade Agreement (NAFTA) have been keeping Canadian Dollar (CAD) exchange rates under pressure.

The Canadian Dollar could enjoy some respite next week, however, if Canadian retail sales and inflation data give the Bank of Canada (BoC) a reason to continue with its rate hiking cycle.

NZ Inflation Data Set to Spark New Zealand Dollar (NZD) Exchange Rate Movement

A dramatic drop in New Zealand’s BusinessNZ Manufacturing PMI weakened the New Zealand Dollar before the weekend. The gauge fell to 51.2 in December, down from 57.7. The measure is now far closer to the 50 mark separating growth from contraction.

NZD exchange rates are likely to experience further volatility next week with New Zealand due to release its performance of services index and consumer price index.

Slowing inflation would weigh on hopes for tighter monetary policy from the Reserve Bank of New Zealand (RBNZ) and could leave the ‘Kiwi’ weaker.

Upcoming Data

Tuesday 23rd January

08:30 NZD Performance Services Index Medium]
20:30 GBP Public Sector Net Borrowing [Medium]
21:00 German ZEW Survey [Medium]
21:00 Eurozone ZEW Economic Sentiment High]

Post by TorFX

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