Pound Sterling (GBP)
Having started Wednesday’s European session in a weak position versus all but the commodity-correlated assets, the Pound recovered some of its losses versus a number of peers. The appreciation can be linked to mixed results from labour market data which saw unemployment drop to the lowest level in a decade but wage growth accelerate at a much slower pace than had been forecast. The weak wage growth result is likely to have a long-term detrimental impact as it fuels speculation that the Bank of England (BoE) will look to delay tightening policy for a considerable time to come. This adds to already damp sentiment following a speech from BoE Governor Mark Carney who stated that a rate hike was still a long way off.
Despite the fact that German economic data saw producer prices miss estimates, the single currency strengthened versus nearly all of its currency rivals. The Euro’s resilience can be linked to demand for carry trades as investors take advantage of the European Central Bank’s (ECB) accommodative policy outlook. Also aiding the single currency appreciation today was a report from the International Monetary Fund (IMF) which stated that European Union member states will likely benefit economically from the influx of migrants.
US Dollar (USD)
With demand for safe-haven assets continuing to support US Dollar strength, the ‘Greenback’ (USD) appreciated versus many of its competitors. However, gains have been somewhat sluggish amid concerns that China’s economic woes, which has seen GDP growth at its lowest in 25 years, will cause the Federal Reserve to delay tightening monetary policy further. Later today, US inflation data is very likely to provoke US Dollar volatility.
Australian Dollar (AUD)
After data out of China showed Foreign Direct Investment unexpectedly contracted, damp market sentiment caused demand for the high-yielding Australian Dollar to dampen considerably. Adding to the ‘Aussie’ (AUD) downtrend was disappointing domestic data which showed that January’s Consumer Confidence contracted by -3.5%; causing the index to decline from 100.8 to 97.3.
New Zealand Dollar (NZD)
Much like its South Pacific neighbour, the New Zealand Dollar softened versus most of its peers in response to damp market sentiment following disappointing data out of China. China’s weak Foreign Direct Investment in December caused the Shanghai Composite Index to end the Asian session over 1% down. A drop in New Zealand’s fourth-quarter Consumer Price Index also weighed on demand for the ‘Kiwi’ (NZD).
Canadian Dollar (CAD)
Given crude oil prices remain well below $30 a barrel, with WTI Crude dropping to $27.73, it is perhaps unsurprising that the Canadian Dollar softened versus most of its major peers. Later today should see significant CAD volatility, however, with the Bank of Canada (BOC) interest rate decision due. Many fear that the massive drop in oil prices and the resultant weak Canadian Dollar will cause the BOC to cut the benchmark interest rate.