New Zealand Dollar Falters Ahead of NZ Trade Data

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Headlines

  • US Dollar Recovery Weighed on AUD Exchange Rates – Market risk appetite declined as trade war fears persisted
  • Brexit Jitters Dented Sterling Demand – Investors unsettled by latest signs of dissent within Conservative government
  • ECB Policymaker Called for End to Quantitative Easing Program – Euro strengthens as central bank shifts towards hawkishness
  • Inconclusive NAFTA Talks Fail to Diminish Canadian Dollar – Hopes remain for future of critical trade agreement

Australian Dollar

There was little incentive for investors to favour the Australian Dollar at the start of the week, with the general sense of market risk appetite fading once again. As the US Dollar recovered ground and fears of a potential trade war continued to escalate AUD exchange rates came under fresh pressure. With markets already starting to brace for the release of the latest Australian inflation data on Wednesday the mood towards the ‘Aussie’ is likely to remain muted in the near term.

Even so, with forecasts pointing towards a solid rebound from the NAB business confidence index for December AUD exchange rates could find some degree of support today.

Sterling

Brexit weighed on Sterling during Monday’s European session as worries over the shape of the UK’s future relationship with the EU saw a resurgence. Fresh ructions within the Conservative government over the issue prompted GBP exchange rates to trend lower, with markets still questioning Theresa May’s grasp on power. All in all, these latest political jitters served to limit the appeal of the Pound, with no real end to the sense of Brexit-based uncertainty in sight.

While no change is forecast for the latest UK net consumer credit figure it could still provoke fresh volatility for Sterling this evening.

Euro

While the German import price index showed a disappointing dip in December this failed to particularly dent EUR exchange rates. Even though price pressures clocked in at just 0.3% on the month this was not enough to significantly shake market confidence in the Euro. As European Central Bank (ECB) Governing Council member Klaas Knot commented that the quantitative easing program needs to end as soon as possible this added to the buoyance of the single currency.

However, if the German consumer price index fails to match expectations the Euro is likely to fall out of favour.

US Dollar

After its recent run of weakness the US Dollar saw some improvement overnight, benefitting as investors capitalised on its relative weakness. Although concerns over the US trade outlook remain these were also temporarily overshadowed by December’s personal consumption expenditure index. The Federal Reserve’s preferred measure of inflation held steady at 1.5% on the year, signalling that price pressures within the US economy are still intact, albeit lacking any fresh momentum.

An uptick in January’s consumer confidence index may boost USD exchange rates further, although political developments remain a notable headwind.

Canadian Dollar

As oil prices came under renewed pressure thanks to rising US output the Canadian Dollar softened. However, CAD exchange rates found some relief on the back of news that NAFTA talks will continue, even though an agreement is clearly still a distant prospect thanks to the current US approach. With the fate of the trade agreement not yet sealed the Canadian Dollar was able to hold its ground against many of its fellow majors.

If the oil market remains bearish, though, CAD exchange rates may struggle to maintain any particular gains.

New Zealand Dollar

Weaker market risk appetite left the New Zealand Dollar exposed to the downside on Monday, with worries over the global trade outlook rising. Confidence in the ‘Kiwi’ was also limited as investors moved to take positions for this morning’s trade data, with forecasts pointing towards a narrowing of the trade deficit.

Providing that export volumes are shown to have risen on the month in December this could encourage the New Zealand Dollar to return to an uptrend.

Data Released

January 30th 07:45 NZD Trade Balance (DEC) -125 million
January 30th 10:30 AUD NAB Business Confidence (DEC) 12
January 30th 19:30 GBP Net Consumer Credit (DEC) 1.4 billion
January 30th 20:00 EUR Eurozone Gross Domestic Product (YoY) (4Q) 2.7%
January 30th 23:00 EUR German Consumer Price Index (YoY) (JAN P) 1.7%
January 31st 01:00 USD Consumer Confidence Index (JAN) 123.0

Post by TorFX

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