Euro Leaps After Unexpectedly Hawkish ECB Minutes

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  • AUD Exchange Rates Benefitted From 1.2% Jump in Australian Retail Sales – Signs point towards stronger consumer confidence
  • Euro Surged Higher on Hawkish ECB Minutes – Odds of return to monetary tightening bias rose sharply
  • NAFTA Worries Weighed Heavily on Canadian Dollar – Potential collapse of trade agreement dims domestic outlook
  • New Zealand Dollar Extended Gains on Solid Housing Data – Risk appetite continues to support NZD

Australian Dollar

November’s retail sales figure proved unexpectedly strong, surging 1.2% on the month as consumer spending increased. This encouraged greater confidence in the Australian economy, although it remains to be seen whether this momentum will be carried through into the crucial Christmas period. AUD exchange rates took encouragement from the data, extending their gains further on Thursday as market risk aversion remained limited.

If the corresponding credit card purchases figure demonstrates similar strength this could keep the Australian Dollar on a bullish run heading into the weekend.


Confidence in the Pound remained rather lacking overnight, with investors unsettled by fresh political jitters and worries over Brexit. Comments from London Mayor Sadiq Khan prompted particular concern, as he criticised the government’s handling of negotiations and warned of the likely negative impact of a so-called ‘no deal’ Brexit. The Bank of England’s (BoE) latest Credit Conditions and Bank Liabilities surveys failed to offer Sterling any support, meanwhile.

With no further UK data set for release this week the Pound is likely to remain under pressure from domestic political developments.


EUR exchange rates surged higher during Thursday’s European session as a result of unexpectedly hawkish European Central Bank (ECB) meeting minutes. As the December meeting was found to have seen a far more lively debate than previously thought the Euro was encouraged to trend higher across the board. The greater level of hawkishness on display amongst policymakers suggests that the ECB could return to a monetary tightening bias sooner than previously expected.

However, the Euro may struggle to hold onto its gains in the short term if sentiment towards the US Dollar improves.

US Dollar

The mixed nature of the latest US jobless claims figures offered the US Dollar little cause for confidence overnight, with the domestic labour market showing signs of loosening. Speculation that the Trump administration could be preparing to pull the US out of the North American Free Trade Agreement also weighed on USD exchange rates. Worries that the world’s largest economy will continue to turn towards protectionism are limiting the appeal of the US Dollar at this juncture.

With forecasts pointing towards a slight easing in the US consumer price index for December USD exchange rates could see further deterioration tonight.

Canadian Dollar

Reports that the US is preparing to back out of NAFTA weighed heavily on the Canadian Dollar, with markets reassessing the likelihood of an imminent Bank of Canada (BOC) interest rate hike. As the demise of the trade agreement would have a significant negative impact on the health of the Canadian economy the mood of investors rapidly soured. The muted nature of the latest new housing price index data did nothing to improve the footing of CAD exchange rates.

Worries over NAFTA are likely to continue to dominate sentiment towards the Canadian Dollar in the near term.

New Zealand Dollar

Risk appetite continued to support NZD exchange rates yesterday, particularly as the odds of the Federal Reserve raising interest rates in the near term seemed to diminish. A slight uptick in the QV house price index added to the bullishness of the New Zealand Dollar, with prices rising 6.6% on the year in December.

The release of November’s building permits figure could offer additional support to NZD exchange rates today.

Data Released

January 12th 07:45 NZD Building Permits (MoM) (NOV)
January 12th 10:30 AUD Credit Card Purchases (NOV)
January 12th 22:30 USD Consumer Price Index (YoY) (DEC) 2.1%
January 12th 22:30 USD Advance Retail Sales (MoM) (DEC) 0.5%

Post by TorFX

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