Pound Sterling (GBP)
Ahead of a speech from Chancellor George Osborne, which is expected to be particularly dovish, the Pound dived versus the majority of its most traded currency rivals. Osborne is expected to warn that 2016 is likely to be one of the toughest years since the height of the financial crisis thanks to a ‘cocktail’ of significant threats related to the global economic slowdown. Domestic data printed positively today with Halifax House Prices eclipsing estimates in December, and with New Car Registrations at an all-time high in 2015. However, the positive data results were unable to affect a Sterling recovery with sentiment damp following yesterday’s less-than-ideal Services PMI.
Despite comparative US Dollar strength, the Euro rallied across the board today after mostly positive data supported demand. Of particular significance was November’s Eurozone Unemployment Rate which dropped from 10.6% to 10.5% despite the median market forecast rise to 10.7%. Whilst unemployment in the Euro-area remains critically high when compare with the US and the UK, the unexpected fall in unemployment is likely to ease tensions in the European Central Bank (ECB). Also supportive of demand for the single currency was December’s German Retail PMI which rose from 49.6 to 50.5 (where 50 is the number which separates growth from contraction).
US Dollar (USD)
Turmoil in China’s equity markets, which saw the Shanghai Composite Index dive by just over 7%, has amplified trader risk-aversion strategies. This saw heightened demand for the US Dollar thanks to its safe-haven qualities. USD gains have been somewhat pegged-back today, however, thanks to the strength of the common currency. Later today, US Initial Jobless Claims and Continuing Claims have the potential to provoke US Dollar volatility.
Australian Dollar (AUD)
With China’s stock values plunging, causing traders to avoid high-yielding, risk-correlated assets, the Australian Dollar dived versus its major peers. Aiding the depreciation was November’s Building Approvals which unexpectedly contracted by -8.4% despite the median market forecast 3.9% growth.
New Zealand Dollar (NZD)
Unlike its Oceanic neighbour the New Zealand Dollar avoided depreciation in response to China’s woes as traders felt that Australia is far more likely to be adversely affected. Recent ‘Kiwi’ (NZD) weakness opened up some attractive buying opportunities which is likely to account for today’s slight appreciation.
Canadian Dollar (CAD)
Crude oil prices dived to a fresh 12-year low during Thursday’s European session, weighing heavily on demand for the commodity-correlated Canadian Dollar. Later today Bank of Canada (BOC) Governor Stephen Poloz will speaking Ottawa. This is likely to provoke ‘Loonie’ (CAD) volatility given that many expect the BOC to intervene in response to sustained low oil prices. December’s Canadian Ivey PMI will also be of interest to those trading with the Canadian asset.