Euro Exchange Rates Benefit as ECB Forecasts Strong 2018 Eurozone Growth

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Headlines

  • Australian Dollar Lacks Direction in Absence of Data – Base metal prices remain volatile
  • Weaker UK Mortgage Approvals Fail to Dent GBP Exchange Rates – Signs point towards softening domestic confidence
  • Optimistic ECB Economic Outlook Forecasts Strong 2018 Eurozone Growth – Euro may reverse gains on German inflation dataCanadian Dollar
  • Remains Bullish on Strong Oil Prices – CAD exchange rates capitalise on softer US Dollar

Australian Dollar

Although it was another day of thin trading volumes on Thursday the Australian Dollar struggled to find any particular traction. A lack of fresh domestic data deterred investors from favouring the antipodean currency, even with the US Dollar on a weaker footing. With base metal prices still seeing volatility there was little incentive to pile into AUD exchange rates.

However, demand for the Australian Dollar could pick up this morning if November’s private sector credit data shows an increase in borrowing on the year.

Sterling

The Pound saw some gains overnight, even after the BBA mortgage approvals figure for November proved disappointing. While mortgage approvals dipped from 40,417 to 39,507 this failed to dent GBP exchange rates, despite this offering further evidence that UK consumer confidence is weakening. With Brexit-based developments lacking ahead of the New Year, though, the downside potential of the Pound was somewhat limited.

As the last UK data releases of 2017 have now been and gone GBP exchange rates may continue to lack any particular momentum in the near term.

Euro

Policymakers struck a largely optimistic tone in the latest European Central Bank (ECB) Economic Bulletin, expressing further confidence in the economic outlook of the Eurozone. Even so, with the ECB unlikely to return to a monetary tightening bias any time soon the positive impact on the Euro was slightly muted. Unless there are signs that domestic inflationary pressure is picking up the upside potential of EUR exchange rates will be restricted.

With forecasts pointing towards the German consumer price index having retreated slightly on the year in December the Euro may trend lower heading into the weekend.

US Dollar

In the wake of a disappointing widening of the advance goods trade deficit for November the US Dollar continued to shed value. Investors were equally unimpressed by another rise in jobless claims on the week, raising concerns that the labour market could be losing some of its previous momentum. This outweighed any bullish influence of a better-than-expected Chicago Purchasing Manager Index, even though the measure leapt to its highest level since March 2011.

Demand for the ‘Greenback’ is unlikely to recover significantly in the near term, with markets still looking unsettled as a result of the Trump administration’s tax reforms.

Canadian Dollar

CAD exchange rates remained on a bullish trend overnight, in large part thanks to the relative weakness of the US Dollar. Persistently strong oil prices also helped to keep the Canadian Dollar on a stronger footing, with Brent crude trending comfortably above the US$60 per barrel mark on the back of strong Chinese demand. With markets confident that the Bank of Canada (BOC) will continue to raise interest rates in 2018 the appeal of the Canadian Dollar has naturally improved.

Even so, if the latest US rig count points towards an increase in production this could take some of the wind out of the Canadian Dollar’s sails.

New Zealand Dollar

Incentive to buy into the ‘Kiwi’ was rather limited on Thursday, with New Zealand data still absent from the calendar. Even though trading volumes remained relatively thin this failed to offer any real boost to NZD exchange rates, with investors still jittery over domestic politics and the future of the Reserve Bank of New Zealand (RBNZ).

The New Zealand Dollar looks set to close out 2018 on a weaker footing, barring any significant swing in market risk appetite.

Data Released

December 29th 10:30 AUD Private Sector Credit (YoY) (NOV) 5.2%
December 29th 19:00 EUR Eurozone M3 Money Supply (YoY) (NOV) 4.9%
December 29th 23:00 USD German Consumer Price Index (YoY) (DEC P) 1.5%

Post by TorFX

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