- Surprise Trade Deficit Dents Australian Dollar – Markets unsettled as streak of Australian trade surpluses broken
- US Dollar Bearish as US Labour Market Data Failed to Impress – Wage growth remains soft and job creation slowed in December
- Eurozone Inflation Underwhelmed Investors – Euro sentiment dampened as ECB looks set to maintain dovish outlook
- CAD Exchange Rates Soared After Unexpected Unemployment Rate Improvement – Canadian economy continues to demonstrate strength
In a disappointing development the Australian trade balance fell significantly short of forecasts to show a deficit of -628 million in November. As the October figure was also revised down this marked the end of Australia’s recent streak of trade surpluses, suggesting that the economy is in a less robust state than previously thought. This left the Australian Dollar on a weaker footing heading into the weekend, even as the general sense of market risk appetite picked up.
Any softening of the Australian construction PMI is likely to put further downside pressure on AUD exchange rates this morning.
The Office for National Statistics helped to boost the appeal of the Pound during Friday’s European session, with the ONS reporting that UK productivity picked up to 0.9% in the third quarter of 2017. While the economy may struggle to maintain this momentum over the coming months, given the significant degree of Brexit-based uncertainty that remains, this was not enough to prevent GBP exchange rates strengthening on the news. Even so, Sterling was unable to return to a particularly bullish trend thanks to poor new car sales data.
Today’s Halifax house price index data could offer additional support to the Pound, with the housing market thought to have held up in December.
Investors were not impressed by the Eurozone consumer price index data, which proved rather mixed in nature. As the headline inflation rate fell back from 1.5% to 1.4% this further diminished the odds of the European Central Bank (ECB) returning to a monetary tightening bias in the near future. With inflation failing to pick up as policymakers would like the ECB is likely to leave its quantitative easing program in place for longer.
Forecasts point towards a solid increase in Eurozone retail sales for November, which may help to limit the downside bias of the Euro this evening.
Demand for the US Dollar remained rather lacking on Friday night, with the December non-farm payrolls report proving quite lacklustre in nature. As the rate of job creation slowed and average earning failed to pick up the report offered the Federal Reserve little cause for confidence. With the November trade deficit widening and December’s ISM non-manufacturing composite index dipping on the month there was not much reason to favour the US Dollar.
If tomorrow’s consumer credit figure proves similarly disappointing this could see USD exchange rates extending their bearish run.
CAD exchange rates surged in the wake of a better-than-forecast Canadian unemployment rate, which unexpectedly fell from 5.9% to 5.7%. This continued tightening of the domestic labour market suggests that the economy remains in a strong state of health, especially on the back of bullish oil prices. The fresh drop in unemployment could encourage the Bank of Canada (BOC) to maintain a monetary tightening bias and raise interest rates again in the coming months.
With oil prices faltering, though, the Canadian Dollar’s gains look somewhat fragile today.
New Zealand Dollar
The weaker US jobs data helped to keep New Zealand Dollar exchange rates from returning to a downtrend, although demand for the ‘Kiwi’ nevertheless eased. Left largely at the mercy of wider market sentiment NZD exchange rates lacked any significant momentum heading into the weekend. Lingering political concerns also remain a drag for the New Zealand Dollar.
Confidence in the ‘Kiwi’ looks set to stay muted in the coming days, with domestic data still proving elusive.
January 8th 08:30 AUD Construction PMI (DEC) 56
January 8th 18:30 GBP Halifax House Price Index (YoY) (DEC) 3.9%
January 8th 20:00 EUR Eurozone Retail Sales (YoY) (NOV) 1.9%
January 9th 06:00 USD Consumer Credit (NOV) 18 billion
Post by TorFX