US Dollar Falters as Global Stock Markets Recover Ground

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Headlines

  • Optimistic Commonwealth Bank AUD Forecast Cheered Investors – Australian Dollar supported by general market risk appetite
  • Hawkish BoE Comments Benefitted Pound – Odds of May interest rate hike improved further
  • Euro Remained Jittery Over Future of German Coalition Deal – SPD leader Martin Schulz steps aside to quell membership discontent
  • OPEC Forecasts Continued Rise in US Oil Production in 2018 – Canadian Dollar continues to lack support after disappointing unemployment data

Australian Dollar

As stock markets recovered some of their lost ground at the start of the week the mood towards the Australian Dollar improved. Investors were equally encouraged to pile into the higher-yielding currency on the back of a report from the Commonwealth Bank, which noted that AUD exchange rates are likely to strengthen further over the course of the year. With December’s credit card purchases figure also showing an improvement on the month there was little reason not to support the ‘Aussie’ on Monday.

With a slight dip forecast for January’s NAB business confidence index, though, the Australian Dollar may struggle to maintain its uptrend for long.

Sterling

Comments from Bank of England (BoE) policymaker Gertjan Vlieghe helped to shore up the Pound during the European session. As Vlieghe took a generally hawkish tone on the subject of interest rates this encouraged speculation that the BoE could be on course to raise interest rates again sooner rather than later. However, Sterling was unable to maintain this recovery for long, given lingering concerns regarding the Conservative government’s less-than-clear approach to the matter of Brexit.

This evening’s UK consumer price index data is likely to provoke significant volatility for GBP exchange rates, with an uptick in inflation having the potential to dent the odds of a May BoE rate hike.

Euro

Demand for the single currency was fairly limited yesterday, with markets still rather jittery as the upcoming SPD membership vote on the German coalition deal draws closer. While Martin Schulz stepped down from his position as SPD leader and announced that he will not take a ministerial position in the coalition government the threat of a rebellion remains. In the absence of any notable Eurozone data EUR exchange rates struggled to find any particular traction.

Confidence in the Euro is likely to remain somewhat muted ahead of tomorrow’s raft of high-impact Eurozone figures, including preliminary fourth quarter gross domestic product results.

US Dollar

The general decline in market safe-haven demand saw the US Dollar come under renewed pressure overnight, unwinding some of the gains seen over the course of the last week. With high odds of an imminent Federal Reserve interest rate hike already priced into USD exchange rates their upside potential looks largely exhausted at this juncture. Lingering concerns over the underlying health of the US economy, and the ultimate impact of the Trump administration’s tax reforms, also helped to diminish the appeal of the US Dollar.

Even so, an improvement in the NFIB small business optimism index could help to put a floor under USD exchange rates in the short term.

Canadian Dollar

While market risk appetite largely picked up yesterday this failed to particularly benefit the Canadian Dollar. Oil prices remained under pressure on the back of OPEC raising its forecast for oil supply in 2018, seeing no imminent let-up in rising US crude output. Even though this was coupled with expectations of an uptick in global oil demand the message was still considered more bearish in nature, weighing down the commodity-correlated Canadian Dollar.

With investors still discouraged by Friday’s underwhelming Canadian labour market data CAD exchange rates are unlikely to find any particular rallying point today.

New Zealand Dollar

January saw a sharp uptick in New Zealand retail card spending, jumping 1.4% on the month as consumers showed a greater willingness to make purchases. This suggests that the relative weakness of domestic price pressures is not currently having an adverse impact on the wider economy. The New Zealand Dollar also capitalised on the improvement in general market sentiment, although the antipodean currency failed to hold onto a positive footing overnight.

Unless global markets see another significant rally today the upside potential of NZD exchange rates is likely to be limited.

Data Released

February 13th 10:30 AUD NAB Business Confidence (JAN) 10
February 13th 19:30 GBP Consumer Price Index (YoY) (JAN) 2.9%
February 13th 21:00 USD NFIB Small Business Optimism (JAN) 105.7

Post by TorFX

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