Australian Dollar Trends Lower After Underwhelming Wage Growth Data

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  • Easing Wage Price Index Weighs on AUD Exchange Rates – Australian Dollar vulnerable ahead of labour market data
  • Better-Than-Expected UK Industrial Trends Encourage Pound – Public sector net borrowing figure in focus today
  • Euro Benefits as Eurozone Consumer Confidence Edges Higher – Weak Eurozone PMIs could prompt fresh slump
  • Steady Oil Prices Support Canadian Dollar – Increase in US stockpiles may dent CAD exchange rates

Weaker Wage Growth Dents Australian Dollar

While the Westpac leading index saw a modest improvement on the month in January this was not enough to shore up the Australian Dollar yesterday. Instead focus fell on the fourth quarter wage price index, which showed an unexpected easing on the quarter. With wage growth showing signs of faltering the mood towards the Australian Dollar naturally soured, as weaker wages could encourage further Reserve Bank of Australia (RBA) dovishness.

Unless the labour market shows fresh signs of tightening in this morning’s employment data the mood of AUD exchange rates is unlikely to improve.

Pound Gains Ground as Industrial Trends Better Forecasts

The Pound found support on the back of a better-than-expected CBI industrial trends survey, which showed a recovery in orders in February. While this suggests a greater level of resilience within the UK economy, though, the gains of GBP exchange rates were limited by lingering market unease. As three Conservative MPs defected to the newly formed Independent Group this raised fresh worries over Brexit, even though the move does not fundamentally change the current parliamentary math.

January’s public sector net borrowing figure could put fresh pressure on the Pound if government debt sees a sharp increase.

Improved Eurozone Consumer Confidence Encourages Euro

As February’s Eurozone consumer confidence index bettered forecast this offered a boost to the Euro. Even though the index remained in negative territory the improvement on January’s reading was enough to shore up EUR exchange rates last night. Solid German producer price index data also gave the single currency encouragement, with signs pointing towards stronger inflationary pressure within the Eurozone’s powerhouse economy.

Signs of weakness in the latest Eurozone manufacturing and services PMIs, however, could weigh heavily on the Euro this evening.

US Dollar Eased Ahead of Fed Minutes

Demand for the US Dollar proved limited ahead of the release of the Federal Open Market Committee’s (FOMC) most recent set of meeting minutes. As the odds of further monetary tightening have declined since the start of the year USD exchange rates struggled to find traction yesterday. Worries over the underlying health of the US economy remain, even as hopes of a US-China trade agreement have encouraged markets.

As forecasts point towards a sharp uptick in durable goods orders in December this could offer the US Dollar a leg up against its rivals.

Oil Optimism Supports Canadian Dollar

The positive mood of the oil market kept the Canadian Dollar on a stronger footing overnight, even though confidence in the domestic economy remains slim. With the US Dollar under pressure and investors betting on a potential US-China trade agreement the downside pressure on CAD exchange rates eased. Even though domestic data has proved largely underwhelming in recent days this was not enough to dampen the mood towards the Canadian Dollar.

Tonight’s US crude oil inventories data may extend the gains of CAD exchange rates, provided that stockpiles show a drawdown on the week.

Risk Appetite Fails to Boost New Zealand Dollar

Risk appetite failed to lift the New Zealand Dollar yesterday, even with the US Dollar on the back foot. NZD exchange rates remained on a downtrend as the fourth quarter producer price index output eased from 1.5% to 0.8% on the quarter. With signs still pointing towards weaker inflationary pressure within the New Zealand economy the appeal of NZD diminished in the wake of the data.

In the absence of any fresh domestic data releases today the New Zealand Dollar looks vulnerable to further losses.

Data Releases

February 21st 11:30    AUD    Unemployment Rate (JAN)    5%
February 21st 20:00    EUR    Eurozone Manufacturing PMI (FEB)    50.3
February 21st 20:00    EUR    Eurozone Services PMI (FEB)    51.3
February 21st  20:30    GBP    Public Sector Net Borrowing (JAN)    -1.1 billion
February 22nd 00:30    CAD    Wholesale Trade Sales (MoM) (DEC)    -0.3%
February 22nd 00:30    USD    Durable Goods Orders (DEC)    1.8%

Post by TorFX

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