Pound Sterling (GBP)
Confidence in Prime Minister David Cameron’s ability to convince European Union officials to back his reforms has dampened considerably on Friday. This is due to concerns that the fact that talks have dragged on for a second day, and are likely to continue into the weekend, reduces the likelihood that the PM will secure a deal without major concessions. Given that Cameron has promised to only accept a ‘credible deal’ to sell to British voters, there is a very real chance that he will return without having secured any deal at all. British economic data produced positive results with public finances data showing the largest surplus of any January since 2008. Also, UK retail sales trumped expectations in January on both an annual and monthly basis. This failed to prop up the Pound, however, with political uncertainty overshadowing domestic ecostats.
The shared currency managed to register fractional daily gains today thanks to heightened demand for financer assets. This is due to dampened market sentiment as falling crude oil prices and global stocks volatility weighs on risk-appetite. European economic data produced disappointing results with particular reference to German producer prices which contracted beyond expectations in January.
US Dollar (USD)
Safe-haven demand has seen the US Dollar edge higher versus a number of its major peers on Friday. Gains have been somewhat limited, however, thanks to the modest Euro uptrend. Later during the North American session, January’s Consumer Prices data will be very likely to provoke USD volatility. Dollar traders will also be closely watching earnings data which could impact on US Dollar exchange rates.
Australian Dollar (AUD)
As market sentiment dampens the Australian Dollar edged lower versus most of its major peers. Also fuelling negative sentiment is concerns that China’s excessive monetary policy easing is not having the desired impact but rather could hinder economic progress.
New Zealand Dollar (NZD)
The New Zealand Dollar didn’t decline as much as its Oceanic counterpart despite its risk-correlation. This is due to hopes that New Zealand will be successful in moving away from reliance on dairy exports, with economic progress projected to be driven by tourism and the services industry.
Canadian Dollar (CAD)
Although crude oil prices dived in response to yesterday’s US stockpiles data which showed inventories had risen beyond expectations, the Canadian Dollar has avoided a significant depreciation thus far on Friday. However, the ‘Loonie’ (CAD) is likely to endure marked volatility in response to domestic consumer prices data.