NZD Records Strong Gains as US Government Shuts Down

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Headlines

  • ‘Aussie’ on Mixed Form – Focus on Chinese iron ore stockpiles dents appetite for Australian Dollar
  • AUD/GBP Slides on Upbeat UK Economic Forecast – Lord O’Neill claims stronger economic growth will counterbalance Brexit impact
  • AUD/EUR Flat as Greek Creditors Consider Bailout – Greece awaits next tranche of bailout funding
  • USD Slumps as Government Shuts Down – CAD weakens on fears NAFTA will collapse, NZD is risk asset of choice

Australian Dollar

A lack of economic data kept the Australian Dollar on mixed form yesterday, with the ‘Aussie’ losing some ground as certain safer currencies like the Pound and Euro began to recover. Concerns over China’s huge stockpiles of iron ore were also putting the brakes on risk appetite, although the Australian Dollar was able to outperform the US Dollar.

The ANZ Roy Morgan weekly consumer confidence index is the only Australian data set for release today, so risk-appetite may still play a key role in determining whether AUD exchange rates advance or fall.

Sterling

The Australian Dollar weakened against the Pound yesterday after Remain-supporting Conservative Treasury minister Lord Jim O’Neill offered a positive outlook on the UK economy. He claimed that, while he hadn’t changed his mind on the negative impact of Brexit, the UK’s growth forecasts could be upgraded thanks to stronger growth in the global economy. Lord O’Neill stated that stronger economic conditions elsewhere could strengthen the UK economy to the point where the boost to growth more-than counterbalances the negative impact of Brexit.

The Pound could see some volatility from today’s public sector borrowing figures, as well as from the Confederation of British Industry (CBI) data due shortly after.

Euro

The Euro was largely on strong form yesterday although it held flat against the Australian Dollar, in part thanks to the weakness in the US Dollar. Markets were waiting to see whether Greece’s creditors would agree to award it the next €6.7 billion in bailout funds; confidence that the Greek government had met the conditions specified in the rescue agreement helped keep EUR demand strong.

Key ZEW survey results for the Eurozone and Germany will keep the Euro turbulent today.

US Dollar

Markets weren’t finding the US Dollar particularly appealing yesterday, with the first day of the government shutdown causing confidence in USD to wane. Republicans and Democrats had over the weekend failed to agree a finance package to keep the government going and, although economists claimed the shutdown would only cause a minor blip in economic growth, investors weren’t feeling confident in the US Dollar.

Canadian Dollar

The Canadian Dollar was mostly on the decline yesterday, although it was able to hold above opening levels versus the Euro and notch up some gains versus the US Dollar. The International Monetary Fund (IMF) released its latest growth forecasts for nations around the world, but markets weren’t impressed with the 0.2% upwards revision to 2018’s growth projections. Traders were left uneasy ahead of today’s beginning of the 6th round of NAFTA renegotiations; if Canada can’t appease the US the entire deal could collapse this week.

New Zealand Dollar

The New Zealand Dollar was enjoying strong demand yesterday thanks to the government shutdown that was cooling appetite for the US Dollar. There was no domestic data released, but with headwinds facing the Australian Dollar and Canadian Dollar, the ‘Kiwi’ was the risk-asset of choice yesterday for many.

The performance of services index for December is due for release shortly.

 Data Released

January 23rd 07.30 NZD Performance of Services Index (DEC)
January 23rd 08.30 AUD ANZ Roy Morgan Weekly Consumer Confidence Index (JAN 21)
January 23rd 19.30 GBP Public Sector Net Borrowing (DEC) -4.2b
January 23rd 20.00 EUR Eurozone ZEW Survey (Economic Sentiment) (JAN)

Post by TorFX

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