End of Government Shutdown Fails to Buoy US Dollar

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Headlines

  • AUD Under Pressure After Consumer Confidence Slump – Slowing Westpac leading index could increase Australian Dollar bearishness
  • US Dollar Boost Limited Despite End to US Government Shutdown – Investors remain unimpressed by US data
  • Solid Services PMI Shored UP New Zealand Dollar – NZD exchange rate momentum likely to fade on weaker credit card spending
  • Eurozone Confidence Surveys Continued to Impress – Euro maintains strong footing thanks to domestic optimism

Australian Dollar

In an unimpressive development the ANZ Roy Morgan weekly consumer confidence index slumped sharply on Tuesday, leaving the Australian Dollar on a weaker footing. Investors were not encouraged to find that the mood within the Australian economy has started to sour somewhat after a relatively optimistic start to the year. Demand for the ‘Aussie’ diminished further as iron ore prices came under renewed pressure, exacerbating concerns over the domestic outlook.

Any loss of momentum in the Westpac leading index could see AUD exchange rates shedding further ground today.

Sterling

While the latest CBI industrial trends survey proved generally positive in nature this failed to particularly shore up GBP exchange rates. Even though manufacturers showed greater optimism in the general state of the economy persistent concerns over skills shortages dampened the mood somewhat. Even a better-than-expected public sector net borrowing figure was not enough to boost the Pound overnight, despite new government debt showing a much smaller uptick than forecast.

With UK wage growth forecast to have held steady at 2.5% in the three months to November Sterling may struggle to find any particular rallying point in the near term.

Euro

The positive run of Eurozone data continued on Tuesday, with the ZEW economic sentiment surveys and the finalised consumer confidence survey for January all bettering expectations. This naturally suggests that the domestic economy remains in a robust state of health, boding well for the outlook going forward. With German coalition talks progressing to their next phase the mood towards the Euro remained generally buoyant, in spite of some concerns over the prospect of another collapse in negotiations.

Although some slight slowing is expected from the latest raft of Eurozone PMIs this is unlikely to be enough to significantly dent the appeal of the single currency.

US Dollar

As the partial shutdown of the US government ended this offered USD exchange rates some degree of relief. However, ongoing doubts over the abilities of the Trump administration and the continued bullishness of the Euro limited the upside potential of the US Dollar overnight. A disappointingly sharp dip in the Richmond Fed manufacturing index gave investors fresh reason to sell out of the US Dollar, highlighting an underlying sense of weakness within the world’s largest economy.

Tonight’s existing home sales figures are unlikely to bolster USD exchange rates, with the domestic housing market thought to have slowed in December.

Canadian Dollar

Jitters over the likely fate of NAFTA have limited the appeal of the Canadian Dollar, given the concerns expressed by Bank of Canada (BOC) policymakers at last week’s meeting. With the US continuing to ramp up its protectionist rhetoric there remains a distinct risk that the trade agreement could collapse, exposing the Canadian economy to significant risk. Even so, as Canadian wholesale trade rose for the second month in a row in November this limited the losses of CAD exchange rates.

Softness in the oil market could weigh on the Canadian Dollar ahead of the latest US crude production data.

New Zealand Dollar

Although December’s services PMI dipped from 56.5 to 56.0 the New Zealand Dollar remained on a bullish trend during trade on Tuesday. As the index is still firmly within expansion territory this was still a positive signal for the New Zealand economy, suggesting that solid growth persisted at the end of 2017. With the appeal of the US Dollar still limited the higher-yielding ‘Kiwi’ naturally continued to attract investors.

Weaker levels of domestic credit card spending may see NZD exchange rates return to a softer footing, however.

Data Released

January 24th 09:30 AUD Westpac Leading Index (MoM) (DEC)
January 24th 12:00 NZD Credit Card Spending (YoY) (DEC)
January 24th 18:00 EUR German Manufacturing PMI (JAN P) 63
January 24th 18:00 EUR German Services PMI (JAN P) 55.5
January 24th 19:30 GBP Average Weekly Earnings (3M/YoY) (NOV) 2.5%
January 25th 01:00 USD Existing Home Sales (DEC) -1.9%

Post by TorFX

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