Optimistic TTP Forecasts Boost New Zealand Dollar

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Headlines

  • Improved Wage Growth Failed to Galvanise AUD Exchange Rate Rally – Markets sceptical over domestic outlook
  • Surprise Rise in UK Unemployment Weighed Down GBP – Sterling remains under pressure ahead of latest gross domestic product report
  • New Zealand Dollar Pushed Higher on TPP Optimism – Officials forecast 1% boost to New Zealand gross domestic product
  • Euro Remained Under Pressure Thanks to Underwhelming PMIs – Dovish ECB minutes could extend losses further

Australian Dollar

While the fourth quarter wage price index surprised to the upside, clocking in at 2.1% on the year, this failed to encourage particular demand for the Australian Dollar. Investors were more concerned by the contraction of January’s Westpac leading index, which suggests that economic activity is starting to slow. All in all, with the chances of any imminent shift in the Reserve Bank of Australia’s (RBA) policy outlook looking decidedly unlikely there was little to support AUD exchange rates on Wednesday.

With no fresh Australian data due for release today the potential for any Australian Dollar rally looks rather limited.

Sterling

Although UK wage growth surprised to the upside in the three months to December the mood towards the Pound deteriorated yesterday. Focus instead fell on the surprise uptick in the corresponding unemployment rate, which seemed to reduce the odds of the Bank of England (BoE) raising interest rates again in the near future. While BoE Governor Mark Carney reaffirmed a more hawkish outlook in comments before the Treasury Select Committee this was not enough to shore up Sterling.

Even though no real change is expected from the second estimate of the fourth quarter UK gross domestic product this still has the potential to provoke further GBP jitters today.

Euro

Demand for the Euro remained relatively muted in the wake of February’s raft of Eurozone manufacturing and services PMIs. As growth fell short of forecast across the currency union this gave investors fresh incentive to sell out of the single currency, even though the actual results were not overly discouraging. Signs still point towards the Eurozone maintaining a solid rate of growth in 2018, even if the economy appears to have lost some degree of momentum so far this year.

Reaction to tonight’s European Central Bank (ECB) meeting minutes could put further pressure on EUR exchange rates, assuming that policymakers maintain a generally dovish outlook.

US Dollar

US data continued to paint a relatively mixed picture overnight, with solid manufacturing and services PMIs offset by another sharp contraction in existing home sales. Even so, the US Dollar was still supported by market optimism over the prospect of an imminent Federal Reserve interest rate hike. While the world’s largest economy is showing some signs of weakness this is not likely to be enough to deter Fed policymakers from pursuing further monetary tightening over the course of 2018.

An uptick in January’s leading index could help to encourage further gains for the US Dollar, boosting confidence in the domestic outlook.

Canadian Dollar

As oil prices came under renewed pressure ahead of the Federal Open Market Committee’s (FOMC) meeting minutes this left the Canadian Dollar on a softer footing. With forecasts pointing towards another solid build-up in US crude oil inventories on the week the appeal of the commodity-correlated CAD remains distinctly limited at this juncture. The persistent recovery of the US Dollar also put pressure on CAD exchange rates.

With December’s Canadian retail sales forecast to have contracted on the month the Canadian Dollar is likely to remain on a downtrend in the near term.

New Zealand Dollar

In spite of market jitters ahead of the latest Fed meeting minutes the New Zealand Dollar was able to make solid gains across the board on Wednesday. This was largely due to optimistic comments from Trade Minister David Parker, who noted that the Trans Pacific Partnership could boost the domestic economy by up to 1%. Naturally this encouraged markets to take a more positive view of the New Zealand economy, boosting NZD exchange rates.

This morning’s New Zealand credit card spending figures could see the New Zealand Dollar extending its uptrend further, assuming consumer confidence shows signs of improvement.

Data Released

February 22nd 12:00 NZD Credit Card Spending (YoY) (JAN)
February 22nd 19:30 GBP Gross Domestic Product (YoY) (4Q 2nd est) 1.5%
February 22nd 22:30 EUR European Central Bank Meeting Minutes
February 22nd 23:30 CAD Retail Sales (MoM) (DEC) -0.1%
February 23rd 01:00 USD Leading Index (JAN) 0.7%

Post by TorFX

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