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BOC Interest Rate Hike Fails to Support Canadian Dollar

Pound News: BoE Optimism Boosts Sterling

Comments from Bank of England (BoE) policymaker Michael Saunders encouraged the Pound (GBP) to recover some ground on Wednesday.

Although Saunders stressed that any future interest rate increase is likely to be limited and gradual investors were still encouraged by his optimistic assessment of the outlook for UK wage growth.

Even so, GBP exchange rates may struggle to maintain any particular bullish momentum as markets brace for tomorrow’s retail sales data.

 

Euro News: ECB Policymaker Talks Down Loosening Odds

The Pound to Euro (GBP/EUR) exchange rate received a strong boost on the back of the latest commentary from European Central Bank (ECB) vice president Vitor Constancio.

As Constancio talked down the prospect of any imminent return to a monetary tightening bias for the ECB the mood towards the Euro soured, especially as Eurozone inflation was confirmed to have eased.

EUR exchange rates will remain sensitive to ECB comments in the near term, with other policymakers due to speak over the course of the day.

 

US Dollar News: Robust Manufacturing Sector Supports USD Rates

As US industrial production and capacity utilisation figures both surprised to the upside yesterday this encouraged the US Dollar (USD) to gain fresh ground.

This strong data boosted confidence in the underlying health of the world’s largest economy, even though the corresponding manufacturing production data proved a little lacklustre.

The US Dollar could find further strength on the back of this afternoon’s housing starts and building permits data, providing the housing market does not show any signs of slowing.

 

Canadian Dollar News: Markets Disappointed by Cautious BOC Minutes

While the Bank of Canada (BOC) opted to raise interest rates to 1.25%, in line with market expectations, this failed to boost Canadian Dollar (CAD) exchange rates.

Confidence in the Canadian Dollar was instead shaken by the tone of the accompanying meeting minutes, which expressed concerns over the future of NAFTA and potential fallout for the domestic economy.

This is likely to keep CAD exchange rates under some degree of pressure today, although a fresh uptick in the oil market could help to limit any losses.

 

Australian Dollar News: AUD Shrugs Off Home Loan Rebound

An unexpected rebound in Australian home loans failed to put any significant pressure on the Pound to Australian Dollar (GBP/AUD) exchange rate on Wednesday morning.

Even though the Australian economy demonstrated fresh signs of resilience, with the Westpac consumer confidence index also improving, the Australian Dollar (AUD) was unable to sustain any positive momentum.

Support for the Australian Dollar is likely to remain somewhat limited ahead of the weekend, barring any major pick up in market risk appetite.

 

New Zealand Dollar News: Signs Point Towards Weakening Inflationary Pressure

Both the ANZ truckometer and commodity price index disappointed markets, showing sharp contractions on the month in December.

As this offered further evidence that inflationary pressure within the New Zealand economy is failing to materialise the appeal of the New Zealand Dollar (NZD) naturally diminished.

Any further strengthening of the US Dollar could see NZD exchange rates continue to slide today.

 

Upcoming Data

Thursday, 18 January

13:30     US Housing Starts

13:30     US Building Permits

13:30     US Philadelphia Fed Business Outlook

21:30     New Zealand Manufacturing PMI

 

Thomas Taylor

Currency Dealer

01442 892 074

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