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Euro Exchange Rates Recover Ground on Solid Eurozone Inflation

Pound News: Rejection of City Brexit Proposal Dents Sterling

Markets were unsettled by reports that EU officials have rejected a blueprint for a post-Brexit free trade deal on financial services, raising fresh concerns over the future of the City.

This naturally weighed on the Pound (GBP), with investors still seeing little cause for confidence in the outlook of the UK economy at this stage.

Even so, if January’s manufacturing PMI points toward the sector having started 2018 on a stronger footing this could rally GBP exchange rates today.

 

Euro News: Investors Encouraged by Eurozone Inflation Data

The Euro (EUR) trended higher against its rivals on Wednesday, encouraged by a better-than-expected Eurozone consumer price index reading.

As the headline inflation rate showed a smaller dip on the year than forecast this boosted hopes that the European Central Bank (ECB) will prove more hawkish over the coming months.

However, as no change is forecast for the finalised raft of Eurozone manufacturing PMIs support for the Euro could prove somewhat limited.

 

US Dollar News: State of the Union Address Failed to Boost USD

A sharp contraction in US pending home sales added to lingering concerns over the underlying health of the world’s largest economy, keeping the US Dollar (USD) under pressure.

USD exchange rates failed to find any particular support on the back of the 2018 State of the Union address, which did not offer the detail on infrastructure spending plans that markets had hoped for.

As forecasts point towards a dip in the ISM manufacturing index this could put further downside pressure on the US Dollar.

 

Canadian Dollar News: Stronger Canadian GDP Encouraged Optimism

In a positive surprise for the Canadian economy the November gross domestic product data bettered forecast, with growth accelerating to 3.5% on the year.

This stronger showing helped to shore up the Canadian Dollar (CAD) in spite of the ongoing weakness of oil prices, driven by a fresh increase in US crude stockpiles.

So long as the latest manufacturing sector data points towards further solid growth at the start of the year CAD exchange rates may remain on a positive trend in the near term.

 

Australian Dollar News: Fourth Quarter Inflation Missed Forecast

The fourth quarter Australian consumer price index failed to live up to expectations on Wednesday, with inflation only rising to 1.9% on the year.

With inflationary pressure still below the Reserve Bank of Australia’s (RBA) 2% target the odds of any imminent shift towards hawkishness weakened, to the detriment of Australian Dollar (AUD) Exchange Rates.

A similarly disappointing showing from tomorrow’s producer price index figures could see the Australian Dollar extending its losses heading into the weekend.

 

New Zealand Dollar News: NZD Capitalises on Weaker Rivals

A lack of fresh domestic data did not prevent the New Zealand Dollar from gaining ground across the board, still benefitting from the bearishness of the US Dollar.

Although the Chinese manufacturing PMI disappointed this failed to put a particular dampener on NZD exchange rates.

Even so, if tonight’s New Zealand building permits data points towards a weakening within the domestic housing market the ‘Kiwi’ may struggle to maintain its positive momentum.

 

Upcoming Data

Thursday, 1 February

09:00     Eurozone Manufacturing PMI

09:30     UK Manufacturing PMI

14:30     Canadian Manufacturing PMI

15:00     US ISM Manufacturing Index

21:45     New Zealand Building Permits

Thomas Taylor

Currency Dealer

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