Pound Under Pressure from Stagnant UK Retail Sector

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  • AUD Exchange Rates Recover Ground as Impact of Chinese Coal Ban Announcement Fades – Market risk appetite shores up Australian Dollar
  • Stagnant UK Retail Sales Weigh on Pound – Odds of no-deal Brexit increase further
  • Euro Under Pressure as German Business Confidence Deteriorates – Worries over Eurozone economic outlook mount
  • Hopes of US-China Trade Agreement Weigh on USD Exchange Rates – Federal Reserve commentary fails to boost US Dollar

Fading Worries over Chinese Coal Ban Boost Australian Dollar

As the impact of news of a Chinese port’s ban on Australian coal imports began to fade this offered the Australian Dollar an opportunity to recover some of its lost ground. Investors expect the ban to ultimately have a limited impact on the Australian economy, in spite of its high level of coal exports. The latest bout of hope stemming from the prospect of a US-China trade agreement also offered support to AUD exchange rates ahead of the weekend.

In the absence of any fresh Australian data today the mood towards the Australian Dollar is likely to be dictated by wider market risk appetite.

Pound Falters as UK Retail Sales Flatline

February’s CBI distributive trends survey failed to offer the Pound any encouragement as retail sales proved flat. With the retail sector continuing to struggle throughout the first quarter worries over the strength of the gross domestic product mounted. Worries over Brexit also put pressure on GBP exchange rates on Friday as the odds of the UK leaving the EU without a deal appeared to pick up further.

As long as investors see an elevated risk of a no-deal Brexit the appeal of the Pound is unlikely to improve.

Weakening German Business Confidence Encourages Euro Selling 

The German IFO business sentiment index weakened further on the month in February, falling from 99.3 to 98.5. This continued deterioration in business confidence weighed on the Euro, suggesting that the Eurozone’s powerhouse economy could continue to lose its momentum in the first quarter. Confirmation that the German gross domestic product stagnated in final three months of 2018 also kept EUR exchange rates on a weaker footing.

Ahead of tomorrow’s German consumer confidence index the single currency may struggle to gain any ground against its rivals.

Hopes of US-China Trade Agreement Weigh on US Dollar

A general improvement in market risk sentiment left the US Dollar on a softer footing ahead of the weekend as hopes of progress towards a US-China trade agreement picked up. This limited the appeal of the safe-haven US Dollar, even though an agreement would reduce some of the recent pressure on the US economy. Comments from Federal Reserve policymakers also failed to offer any boost to USD exchange rates on Friday.

Tonight’s Chicago Fed national activity index eases as forecast this could see the US Dollar fall further out of favour.

Mixed Retail Sales Data Limits Canadian Dollar Appeal

Canadian retail sales data bettered expectations in December, showing a 1.7% acceleration on the year. However, the Canadian Dollar struggled to capitalise on this improvement due to the continued contraction in the monthly retail sales figure. This suggests that the underlying trend in sales is still negative, with consumers spending less as confidence in the economic outlook remains limited.

If the oil market remains in a positive mood this could help CAD exchange rates to return to a stronger footing over the course of the day.

New Zealand Dollar Picks up After Credit Card Spending Increase

A sharp increase in New Zealand credit card spending in January failed to give NZD exchange rates a significant boost on Friday. Even though consumers showed signs of greater confidence this was not enough to encourage demand for the risk-sensitive New Zealand Dollar. However, as market risk appetite generally picked up during the European session this helped to shore up NZD exchange rates.

Demand for the New Zealand Dollar could pick up further this morning if the fourth quarter retail sales data shows a similar improvement.

Data Releases

February 25th 08:45    NZD    Retail Sales ex Inflation (QoQ) (4Q)    1.1%
February 26th 00:30    USD    Chicago Fed National Activity Index (JAN)    0.11

Post by TorFX

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