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Euro Dominant as ECB Proves Optimistic on Inflation

Pound News: Poor Sales Data Fails to Dent Sterling

A weaker-than-expected CBI reported sales figure was not enough to knock the Pound (GBP) off its stronger footing yesterday.

While this suggests that consumers have continued to rein in their spending as a result of the ongoing wage squeeze, investors remain confident about the prospect of a more hawkish Bank of England (BoE) outlook.

However, today’s fourth quarter gross domestic product data could undermine the appeal of Sterling if growth shows signs of faltering.

 

Euro News: EUR Exchange Rates Surge on ECB Comments

While the European Central Bank (ECB) did not alter its policy outlook at its latest policy meeting this failed to keep Euro (EUR) exchange rates from rallying.

Markets were encouraged by ECB President Mario Draghi’s more confident tone on the subject of inflation, indicating that the central bank expects price pressures to continue mounting over the coming months.

Even so, if ECB policymaker Benoît Cœuré takes a more dovish view on monetary policy in comments this morning the Euro could struggle to hold onto its gains for long.

 

US Dollar News: Protectionism Continues to Weigh on USD

Officials continued to talk down the US Dollar (USD) on Thursday, with the Trump administration doubling down on its more belligerent and protectionist trade talk.

This left USD exchange rates in a slump, especially as the domestic housing market showed fresh signs of slowing.

A strong showing from this afternoon’s annualised fourth quarter gross domestic product, however, could help to put a floor under the US Dollar ahead of the weekend.

 

Canadian Dollar News: Canadian Retail Sales Disappoint

November’s retail sales data proved disappointing, with growth in sales found to have slowed from 1.6% to 0.2% on the month.

With markets still speculating over the possible collapse of NAFTA this helped to boost the Pound to Canadian Dollar (GBP/CAD) exchange rate higher, adding to worries over the domestic outlook.

Demand for the Canadian Dollar (CAD) is likely to diminish further if the latest Canadian inflation data shows a contraction on the month as forecast.

 

Australian Dollar News: Lack of Data Limits AUD Momentum

In the absence of any Australian data the Pound to Australian Dollar (GBP/AUD) exchange rate saw limited downside yesterday.

However, with the US Dollar still under considerable pressure the higher-yielding ‘Aussie’ (AUD) continued to benefit from the weakness of its key rival.

Mounting concerns over US protectionism could somewhat limit the appeal of the Australian Dollar in the near term, though.

 

New Zealand Dollar News: Underwhelming Inflation Diminishes RBNZ Hike Odds

After the fourth quarter New Zealand consumer price index fell short of forecast on both the year and the quarter, the mood towards the New Zealand Dollar (NZD) soured markedly.

With inflationary pressure failing to build as policymakers would like, this raises the odds of the Reserve Bank of New Zealand (RBNZ) remaining on hold for the foreseeable future.

Confidence in the New Zealand Dollar is unlikely to improve ahead of the weekend, even with the US Dollar continuing to weaken.

 

Upcoming Data

Friday, 26 January

09:30     UK Gross Domestic Product

13:30     Canadian Consumer Price Index

13:30     US Gross Domestic Product

 

James Spurway

Currency Dealer

01442 892 070

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