Mixed Labour Market Data Leaves Australian Dollar Weaker

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  • AUD Exchange Rates Softened on Sharp Shift Towards Part Time Employment – Dovish RBA comments could extend losses today
  • Euro Failed to Capitalise on Surprise Fall in French Unemployment – Markets remain doubtful of prospect for return to ECB hawkishness
  • Contraction in Home Sales Weighed Down CAD – Concerns over health of Canadian economy persist
  • Pound Boosted After EU Removed Brexit ‘Punishment Clause’ – Solid retail sales may encourage further Sterling demand

Australian Dollar

While the headline employment change figure for January proved positive this was not enough to shore up AUD exchange rates on Thursday. The underlying details of the labour market report were rather more discouraging in nature, with a sharp increase in part time employment masking a significant dip in full time positions. With the participation rate also easing on the month there was little motive for investors to favour the Australian Dollar.

Comments from Reserve Bank of Australia (RBA) Governor Philip Lowe could put further pressure on AUD exchange rates today, with any hint of dovishness likely to be seized upon by markets.


Reports that EU officials have removed the so-called ‘punishment clause’ from the draft proposal for the Brexit transition period boosted the appeal of the Pound. Even though a significant degree of uncertainty over the details of Brexit remains GBP exchange rates were still able to make some solid gains across the board. This sign of compromise from the EU naturally boosted hopes that the next round of negotiations might go a little smoother, something which would benefit Sterling.

A solid uptick in January’s UK retail sales figures may extend the Pound’s gains further heading into the weekend.


Although the French unemployment rate surprised to the downside, dipping from 9.6% to 8.9% in the fourth quarter, the Euro struggled to fully capitalise on this strong showing. Confidence in the single currency was somewhat dented by confirmation that the Spanish inflation rate had contracted sharply on the month in January, undermining the prospect of any imminent European Central Bank (ECB) hawkishness. Even so, the relative weakness of the US Dollar helped to support the Euro against its more risk-sensitive rivals.

If the German wholesale price index figures fail to impress EUR exchange rates are likely to remain on a generally softer footing.

US Dollar

Following on from the previous day’s stronger-than-expected consumer price index, the US producer price index for January showed a surprise uptick. This suggests that inflationary pressure within the world’s largest economy is building at a faster rate than the Federal Reserve has accounted for, increasing the prospect of a more aggressive pace of monetary tightening in 2018. However, as this was accompanied by disappointing production and capacity utilisation results the mood towards the US Dollar remained muted overnight.

With forecasts pointing towards a weaker University of Michigan sentiment index the appeal of the US Dollar may not pick up particularly in the near term.

Canadian Dollar

CAD exchange rates returned to a downtrend during Thursday’s European session, driven lower by the underwhelming nature of the latest Canadian existing home sales figure. In a disappointing development, sales were found to have contracted -14.5% on the month in January as the domestic housing market faltered. With the oil market already reversing the previous day’s gains there was little reason to favour the Canadian Dollar.

A similarly weak showing from tonight’s manufacturing sales data could prompt CAD exchange rates to shed additional ground.

New Zealand Dollar

A modest rebound in January’s REINZ house sales index offered support to the New Zealand Dollar, even though it failed to entirely reverse the contraction seen in December. As the US Dollar remained under pressure this offered a boost to the higher-yielding ‘Kiwi’, with the antipodean currency also benefitting from a weaker Australian Dollar on Thursday.

Should the latest New Zealand manufacturing PMI prove positive NZD exchange rates are likely to remain on an uptrend ahead of the weekend.

 Data Released

February 16th 07:30 NZD Manufacturing PMI (JAN) 52.5
February 16th 08:30 AUD RBA Governor Lowe Gives Testimony to Parliamentary Committee
February 16th 17:00 EUR German Wholesale Price Index (YoY) (JAN)
February 16th 19:30 GBP Retail Sales Ex Auto Fuel (YoY) (JAN) 2.4%
February 16th 23:30 CAD Manufacturing Sales (MoM) (DEC) 0.3%
February 17th 01:00 USD University of Michigan Consumer Sentiment (FEB P) 95.5

Post by TorFX

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