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Food Price Contraction Fails to End New Zealand Dollar Gains

Pound News: Sterling Loses Momentum Ahead of Inflation Data

Demand for the Pound (GBP) was somewhat limited even in the wake of an uptick in the Rightmove house price index.

Although this pointed towards some degree of strength within the UK housing market this was not enough to boost GBP exchange rates, with investors taking a cautious view ahead of today’s inflation data.

If the consumer price index falls back to 3% on the year in December the Pound could come under fresh pressure, though, as weaker inflation gives the Bank of England (BoE) less incentive to raise interest rates.


Euro News: Widened Trade Surplus Boosted EUR Exchange Rates

Eurozone data continued to impress yesterday, with November’s trade surplus widening further than forecast from 19 billion to 22.5 billion.

The mood towards the Euro (EUR) was also improved by the details of the agreement between Germany’s CDU and Social Democrats, which suggested that a new ‘grand coalition’ could push for greater European integration.

With no change expected in the finalised German consumer price index today, though, the Pound to Euro (GBP/EUR) exchange rate could find some gains.


US Dollar News: Mixed Messages From Fed Maintain USD Dovishness

The mixed messages on offer from Federal Reserve policymakers kept the Pound to US Dollar (GBP/USD) exchange rate on a stronger footing at the start of the week.

With the Federal Open Market Committee (FOMC) showing increasing signs of a split on the subject of monetary policy the prospect of any imminent action seems diminished, to the detriment of the US Dollar (USD).

Even if the Empire manufacturing index strengthens as expected this afternoon the appeal of the US Dollar is likely to remain rather limited in the near term.


Canadian Dollar News: CAD Failed to Capitalise on Strong Home Sales

While Canadian existing home sales picked up by an encouraging 4.5% on the month in December this was not enough to boost Canadian Dollar (CAD) exchange rates.

Even though this stronger showing pointed towards the resilience of the domestic economy demand for the Canadian Dollar remained limited, with markets reluctant to favour the currency ahead of Wednesday’s Bank of Canada (BOC) policy meeting.

As a result, the Pound to Canadian Dollar (GBP/CAD) exchange rate is likely to remain on a stronger footing today, even if the oil market continues its bullish run.


Australian Dollar News: TD Securities Inflation Gauge Remains Ahead of RBA Target

Although the TD Securities inflation gauge dipped from 2.7% to 2.3% in December this remained comfortably in excess of the Reserve Bank of Australia’s (RBA) 2% inflation target.

This kept the Australian Dollar (AUD) on a positive footing against its rivals, especially as the wider sense of market risk appetite remained heighted by the dovishness of the latest Fed commentary.

If tonight’s Westpac consumer confidence index shows an improvement AUD exchange rates could make further gains.


New Zealand Dollar News: Lack of Food Inflation Failed to Dent NZD

December’s New Zealand food price index proved disappointing, showing a -0.8% contraction on the month as any signs of inflationary pressure failed to materialise.

However, New Zealand Dollar (NZD) exchange rates continued to trend higher on Monday in spite of this, still benefitting from the risk-positive outlook of markets.

Even so, another poor showing from the ANZ truckometer is likely to dent the New Zealand Dollar, with weak inflation set to keep the Reserve Bank of New Zealand (RBNZ) on hold for longer.


Upcoming Data

Tuesday, 16 January 2018

09:30     UK Consumer Price Index

13:30     US Empire Manufacturing Index

21:00     New Zealand ANZ Truckometer

23:30     Australian Westpac Consumer Confidence Index


Alastair Archbold

Currency Dealer 

01442 892 066

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