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Trade War Fears See US Dollar Exchange Rates Retreat

Pound News: Surprise Wage Uptick Boosts GBP

In an unexpected development UK weekly earnings excluding bonuses showed a modest acceleration to 2.4% in the three months to November.

This encouraged the Pound (GBP) to surge higher across the board on Wednesday, despite the fact that wage growth is still a long way from catching up with domestic inflation.

Any improvement in the BBA loans for house purchase figure may keep GBP exchange rates on a stronger footing, although the Pound is unlikely to maintain its highs for long.

 

Euro News: ECB Anticipation Leaves Single Currency Soft

Demand for the Euro (EUR) faltered yesterday as the latest raft of Eurozone manufacturing and services PMIs proved a little mixed in nature.

As the manufacturing sector lost some of its recent bullish momentum this gave investors incentive to sell out of the single currency, even though the measure remained at a strong level.

The mood towards the Euro is expected to deteriorate further ahead of today’s European Central Bank (ECB) rate decision, with policymakers likely to maintain a more dovish policy bias.

 

US Dollar News: USD Exchange Rates Trend Lower on Belligerent Trade Rhetoric

Comments from Treasury secretary Stephen Mnuchin helped to push the Pound to US Dollar (GBP/USD) exchange rate to a fresh post-Brexit high.

With Mnuchin noting that a weaker US Dollar is good for the domestic economy and taking a more belligerent tone on the subject of trade markets saw little reason to support USD exchange rates.

Even so, if December’s advance goods trade deficit is found to have narrowed on the month this could offer some relief to the US Dollar today.

 

Canadian Dollar News: Stronger Oil Fails to Support CAD Rates

While oil prices pushed higher on the back of a 1.1 million barrel drawdown seen in the latest US crude oil inventories report this failed to benefit the Canadian Dollar (CAD).

The initial impact of the Trans-Pacific Partnership news was quick to fade overnight, leaving CAD exchange rates exposed to lingering concerns over the future of NAFTA.

With growth in retail sales thought to have slowed on the year in November the Canadian Dollar may not find a rallying point this afternoon.

 

Australian Dollar News: Optimism as Westpac Growth Index Betters Forecast

Confidence in the Australian Dollar (AUD) recovered as the Westpac leading index surprised to the upside, pointing towards a stronger level of domestic economic growth.

Even though this is unlikely to be enough to drive the Reserve Bank of Australia (RBA) to take a more hawkish outlook in the coming months, though, AUD exchange rates still capitalised on the positive data.

However, the general sense of market risk appetite may fail to sustain a stronger Australian Dollar heading into the weekend.

 

New Zealand Dollar News: RBNZ Rate Hike Odds Remain Low

The appeal of the New Zealand Dollar diminished on Wednesday as markets braced for the latest New Zealand consumer price index data, in spite of the softer US Dollar.

With the Reserve Bank of New Zealand (RBNZ) looking likely to leave interest rates on hold for the foreseeable future the Pound to New Zealand Dollar (GBP/NZD) exchange rate gained fresh ground.

After their recent bullishness NZD exchange rates are expected to remain biased to the downside in the near term.

 

Upcoming Data

Thursday, 25 January

09:30     UK BBA Loans for House Purchase

12:45     European Central Bank Rate Decision

13:30     US Advance Goods Trade Balance

13:30     Canadian Retail Sales

 

David Bayliss 

Currency Dealer

01442 892 067

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