Australian Dollar Falls as Chinese Port Bans Coal Imports

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  • Australian Dollar Slumps as Chinese Port Bans Australian Coal Imports – Investors spooked by blow to major Australian industry
  • Pound Strengthens as UK Public Finances Better Forecast – Weak CBI survey may drag GBP exchange rates down
  • Contracting German Manufacturing Sector Weighs on Euro – Confidence in outlook of Eurozone economy continues to deteriorate
  • US Dollar Struggles to Gain Ground on Durable Goods Orders Miss – Odds of Federal Reserve interest rate hike remain muted

Chinese Ban on Australian Coal Drives Australian Dollar Down

A solid uptick in the number of Australians in full-time employment failed to keep the Australian Dollar on a stronger footing for long. Even though the participation rate saw a modest improvement in January this was overshadowed by news of a Chinese port banning Australian coal imports. This saw AUD exchange rates slump sharply, with the ban likely to hit the Australian economy hard thanks to its large reliance on mining exports.

AUD exchange rates may struggle to find any support this morning, barring a significant breakthrough in US-China trade discussions.

Strong Public Finances Boost Pound

As UK public finances saw their largest January surplus since records began in 1993 this gave the Pound a boost yesterday. With government borrowing falling on the month investors were given greater cause for confidence in the outlook of the UK economy. The more robust state of the public finances offers Chancellor Philip Hammond greater opportunity to support the economy in the event of a negative Brexit outcome. Even so, the continued sense of uncertainty of the UK’s future relationship with the EU ultimately limited the Pound’s strength.

A negative reading from the latest CBI distributive trends index could see GBP exchange rates come under fresh pressure this evening.

Weakening German Manufacturing Weighs on Euro

Confidence in the outlook of the Eurozone economy diminished as the German manufacturing PMI fell short of forecast in February. The manufacturing sector fell further into a state of contraction as the index dipped from 49.7 to 47.6, raising concerns over the strength of the Eurozone’s powerhouse economy. However, as the service sector showed signs of resilience this helped to limit the downside pressure on the Euro overnight.

The mood towards the single currency could sour tonight on the back of another underwhelming German IFO business confidence index.

US Dollar Gains Limited as Durable Goods Orders Miss Forecast

As December’s durable goods orders data failed to pick up as strongly as forecast this left the US Dollar on a weaker footing. USD exchange rates still saw some support from the 1.2% increase in durable goods orders, which points towards a greater level of confidence within the US economy. A surprise plunge in the Philadelphia Fed business outlook index also dented the appeal of the US Dollar last night, suggesting that the Federal Reserve will remain on hold for longer.

Comments from Fed policymakers could see USD exchange rates lose further ground heading into the weekend if they lean towards a more cautious stance on interest rates.

Market Risk Aversion Dents Canadian Dollar

While wholesale trade sales saw an unexpected rebound on the month in December this was not enough to support the Canadian Dollar. Demand for the commodity-correlated currency was muted thanks to the latest downturn in oil prices, even though Brent crude remained firmly above US$66 per barrel. With market sentiment knocked by the Chinese ban on Australian coal imports CAD exchange rates struggled to find a positive footing.

Unless retail sales print positively the Canadian Dollar could remain under pressure tonight.

New Zealand Dollar Softens Ahead of Credit Card Spending

In the absence of any fresh domestic data the New Zealand Dollar remained on the back foot, trending lower as market optimism diminished. NZD exchange rates generally followed the Australian Dollar lower last night, with global trade concerns weighing heavily on the New Zealand Dollar. Even though the Federal Reserve still looks to be in no rush to raise interest rates this was not enough to shore up NZD exchange rates.

Any decline in credit card spending figures could see the New Zealand Dollar shedding further support this afternoon.

Data Releases

February 22nd 13:00    NZD    Credit Card Spending (YoY) (JAN)    
February 22nd 20:00    EUR    German IFO Business Sentiment (FEB)    99
February 22nd 22:00    GBP    CBI Distributive Trades (FEB)    -6
February 23rd 00:30    CAD    Retail Sales (MoM) (DEC)    -0.3%

Post by TorFX

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