Pound Sterling (GBP)
Despite a complete absence of British economic data to drive GBP volatility on Monday, the Pound advanced versus nearly all of its most traded currency competitors. The appreciation can be linked to traders taking advantage of Sterling’s comparatively low trade weighting. Additional gains can be linked to predictions from Danske Bank analysts, who have argued that the Bank of England (BoE) will be pressured into hiking the benchmark interest rate in the second-quarter of 2016. Danske Bank also suggested that British inflation will reach the central bank’s 2.0% target by the end of 2017.
The single currency declined versus its major peers thanks to a combination of weak domestic data and trader profit-taking. The Euro strengthened considerably last week which opened up some attractive selling opportunities. On Monday the single currency extended losses in response to weaker-than-anticipated domestic data. January’s Eurozone Investor Confidence was predicted to drop from 15.7 to 11.4, but the actual result came in at 9.6. The drop in confidence has been linked to concerns that falling oil prices will see Eurozone inflation remain well-below target for some time to come, prompting speculation of additional European Central Bank (ECB) intervention.
US Dollar (USD)
Ahead of December’s US Labour Market Conditions Index Change data, the US Dollar ticked lower versus many of its currency rivals. The depreciation has been somewhat slowed, however, thanks to Euro weakness. Demand for the US Dollar cooled on Monday, despite ongoing risk-aversion strategies, amid concerns that China’s economic struggles will cause the Federal Open Market Committee (FOMC) to avoid hiking the cash rate. Speeches from Fed Officials Dennis Lockhart and Robert Kaplan, due later during Monday’s North American session, have the potential to provoke US Dollar volatility.
Australian Dollar (AUD)
Despite the fact that weaker-than-anticipated Chinese producer prices data bolstered concerns regarding a slowdown in the world’s second-largest economy, the Australian Dollar advanced versus most of its currency rivals during Monday’s European session. This was due to the People’s Bank of China’s (PBoC) decision to fix the reference rate which caused the Yuan to strengthen considerably. Additional gains can be linked to analysis from Capital Economics which stated that the recent sharp falls in equity markets will not filter through into weaker economic growth, and will not pressure the Reserve Bank of Australia (RBA) into easing monetary policy.
New Zealand Dollar (NZD)
With dairy prices continuing to weaken, demand for the New Zealand Dollar continues to wane. Also weighing on demand for the ‘Kiwi’ (NZD) was an over 5.3% drop in China’s Shanghai Composite Index. Further depreciation can be linked to November’s Building Permits which saw 1.8% growth on the month, significantly lower than the upwardly revised previous figure of 5.4%.
Canadian Dollar (CAD)
Crude oil continues to slump as the global glut swells and tensions in the Middle East have minimal impact. This caused the Canadian Dollar to weaken versus many of its rivals, although a slightly softer US Dollar has reduced the ‘Loonie’ (CAD) depreciation somewhat. Later today, December’s Canadian Housing Starts data has the potential to provoke Canadian Dollar movement.