- Decline in Australian Lending Shored up AUD Exchange Rates – Markets hopeful that lower borrowing could improve RBA outlook
- Latest Brexit Commentary Severely Dented Sterling Demand – Investors spooked as Barnier noted that transition deal is ‘not a given’
- Canadian Dollar Slumped as Unemployment Rate Surged Higher – Oil markets remain in state of weakness
- Second Government Shutdown Showed Limited Impact on USD – Upside potential of US Dollar looks restricted in near term
A sharp contraction in December’s home loans and investment lending figures offered a boost to the Australian Dollar ahead of the weekend. As these declines point towards lower levels of household debt this encouraged hopes that the Reserve Bank of Australia (RBA) might find greater cause for confidence in the near future. With the RBA quarterly Statement on Monetary Policy providing little in the way of surprises AUD exchange rates were able to recover some ground on Friday.
This morning’s Australian credit card purchases data may help to boost the Australian Dollar further if it shows a similar easing in borrowing.
The Pound plunged across the board on Friday, driven by the latest comments from chief EU negotiator Michel Barnier. Noting that a transition deal is ‘not a given’, considering the differences that persist between the UK and EU standpoints, Barnier stirred up fresh Brexit-based jitters. Coming on the back of a lacklustre raft of UK trade and production data this left Sterling on a sharp downtrend, reversing all of the gains seen in the wake of the Bank of England (BoE) meeting.
Developments surrounding Brexit are likely to trigger further volatility for the Pound in the near term.
While the Euro nudged higher at the end of the week it was unable to make any particularly strong gains against its rivals. An improved sense of market risk appetite limited the appeal of the single currency, with investors more inclined to favour higher-yielding assets as the recent turmoil on global stock markets started to ease. Persistent worries over the potential collapse of the German coalition deal also put pressure on EUR exchange rates, with SPD members displaying mixed attitudes towards the agreement.
In the absence of fresh domestic data the Euro may struggle to find any particular support today.
As the latest government shutdown proved to be rather short-lived the negative impact on USD exchange rates was ultimately rather muted. Investors remain generally confident in the prospect of the Federal Reserve raising interest rates at its March policy meeting, maintaining a solid level of support for the US Dollar. However, with the general sense of market risk appetite starting to recover as stock market volatility eased the US Dollar came under pressure against higher-yielding rivals such as the Australian and New Zealand Dollars.
Ahead of January’s monthly US budget statement USD exchange rates are likely to see limited headway.
Fresh declines were in store for the Canadian Dollar as January’s raft of labour market data fell significantly short of forecast. As the unemployment rate leapt back to 5.9%, driven by a -88,000 decline in the headline employment figure, this naturally exacerbated worries over the health of the Canadian economy. Even though this decline was largely the result of part-time employees leaving work the negative impact on CAD exchange rates was not diminished.
If oil prices remain under pressure this week the mood towards the Canadian Dollar is likely to sour even further.
New Zealand Dollar
Investors were pleasantly surprised by a sharp rebound in January’s ANZ truckometer, which points towards an uptick in inflationary pressure. While this solid showing only really served to reverse the previous month’s decline, however, the New Zealand Dollar was still able to capitalise on the improvement. After its recent weakness the appeal of the ‘Kiwi’ naturally improved, especially as demand for the US Dollar faltered somewhat.
An increase in New Zealand card spending could help NZD exchange rates to extend their recovery further this morning.
February 12th 07:45 NZD Card Spending (MoM) (JAN)
February 12th 10:30 AUD Credit Card Purchases (DEC)
Post by TorFX