Canadian Dollar Surges on Bullish Retail Sales Data

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Headlines

  • Thin Trading Volumes Benefitted Australian Dollar – Lack of domestic data leaves AUD vulnerable to downside
  • Fresh Disarray in May’s Cabinet Weighed on GBP Exchange Rates – UK consumer confidence continued to fall
  • Euro Softened as Catalonia Returned to the Polls – Rising Eurozone confidence offered fresh boost
  • Canadian GDP and Retail Sales Bettered Expectations – CAD soared higher on improved domestic outlook

Australian Dollar

In the absence of fresh domestic data the Australian Dollar nevertheless returned to a generally stronger footing. AUD exchange rates made some solid gains on Thursday, capitalising on thinning trading volumes and weakness in the US Dollar. As the latest US growth and employment data failed to impress this offered support to the commodity-correlated ‘Aussie’, limiting its exposure to downside pressure.

These gains are still fragile, however, and the Australian Dollar remains vulnerable to any deterioration in wider market sentiment today.

Sterling

Theresa May’s position as Prime Minister appeared to weaken further as her close ally Damien Green was ousted from his position late on Wednesday. With the cabinet still at odds over Brexit this development naturally rattled investors, potentially throwing the minority Conservative government out of balance. A surprise weakening in the GfK consumer confidence index for December also weighed on Sterling, pointing towards a continued deterioration in domestic sentiment.

With no major changes expected in the finalised third quarter gross domestic product report this could offer the Pound a rallying point ahead of the weekend.

Euro

Confidence in the single currency diminished somewhat as Catalonia returned to the polls in fresh regional elections. With pundits suggesting that the result will be close this has the potential to stir up tensions over Catalan independence. Even if the separatists emerge victorious, however, this is unlikely to weigh on the Euro for long. Demand for the single currency also picked up later in the European session thanks to a better-than-expected jump in the Eurozone consumer confidence index.

If the German GfK consumer confidence index shows a similar improvement on the month this may set EUR exchange rates on a bullish trend.

US Dollar

Markets were discouraged to find that the third quarter US gross domestic product had been revised lower, indicating that growth was not as robust as initially thought. Similarly disappointing jobless claims figures added to the downside pressure on the US Dollar, further dampening investor appetite. This could give the Federal Reserve reason to take a more gradual approach to any future monetary tightening, reducing the upside potential of the ‘Greenback’.

However, forecasts point towards stronger showings from tonight’s personal consumption expenditure core and durable goods orders data.

Canadian Dollar

Demand for the ‘Loonie’ surged overnight as November’s Canadian consumer price index data bettered forecasts. As growth leapt 2.1% on the year this encouraged greater optimism in the domestic outlook, particularly when coupled with the latest retail sales figures. CAD exchange rates received another solid boost from the sales data, which rose 2.5% on the month rather than 0.3% as forecast.

Another encouraging showing from October’s gross domestic product report could prompt the Canadian Dollar to extend its gains further.

New Zealand Dollar

As the third quarter New Zealand gross domestic product clocked in at 2.7% on the year, as opposed to 2.4%, this buoyed the appeal of the ‘Kiwi’. Indicating that the economy is on a stronger footing than expected, this helped to overshadow lingering worries over the future of the Reserve Bank of New Zealand (RBNZ). Thinner trading volumes also offered support to NZD exchange rates.

With no further domestic data set for release in the near future the New Zealand Dollar may struggle to hold onto any particular trend, however.

Data Released

December 22nd 17:00 EUR German GfK Consumer Confidence (JAN) 10.7
December 22nd 19:30 GBP Gross Domestic Product (YoY) (3Q F) 1.5%
December 22nd 23:30 CAD Gross Domestic Product (YoY) (OCT) 3.5%
December 22nd 23:30 USD Personal Consumption Expenditure Core (YoY) (NOV) 1.5%
December 22nd 23:30 USD Durable Goods Orders (NOV P) 2.0%

Post by TorFX

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