Sterling
The Pound softened towards the close of the week, with investors left with little to enthuse over now that the key Brexit speech and Supreme Court decisions are in the past. The only thing on the horizon is the triggering of Article 50 – a bad occurrence from the market’s point of view, even if MPs do amend the bill in Parliament – so investors positioned themselves short on GBP.
Euro
Eurozone data was positive on Friday, while a weak US Dollar provided further EUR support. The M3 money supply figure for the Eurozone rose above-forecast to 5%, indicating that the pool of Euros and Euro-denominated assets in circulation was increasing faster-than-expected. More money in the system weakens the value of the common currency, which pushes consumer prices higher. Mario Draghi, the European Central Bank (ECB) chief, wants to see evidence of sustained domestic cost pressures from the currency bloc, so the latest M3 data may help to push the Governing Council towards a more hawkish policy outlook.
German consumer price growth data for January is set for release later today; a strong showing here could further boost hopes of a hawkish shift amongst policymakers.
US Dollar
After a freak surge to 3.5% in the third quarter following a shortage of soybean products in South Africa, US GDP for the fourth quarter of 2016 slowed by more than forecast to 1.9%. Economists had been expecting a result of 2.2%, which would still have represented sturdy progress compared to the previous two years. Friday’s other headline data also fell short of forecasts, contracting -0.4% against forecasts of a return to growth.
Figures for US personal consumption during December are set for release today. This is the Federal Reserve’s preferred way of measuring inflation, so a rise here will further boost the likelihood of monetary tightening this year.
Canadian Dollar
Although a slumping US Dollar usually boosts the crude oil markets, both ‘black gold’ and the Canadian Dollar were in falling sharply on Friday. Market analysts from Commerzbank warned that participants in the oil market were being too optimistic, ignoring the headwinds facing oil producers and global oversupply in order to focus solely on the positives. This suggested that a marked downwards correction was likely as investors realised the precariousness of the current hold in oil prices above US$50 per barrel.
Australian Dollar
Positive domestic data and a weak US Dollar drove the Australian Dollar higher on Friday. Export data showed that prices for Australia’s goods sent overseas had grown at the fastest rate since 2010. Such firm price growth has all-but-cemented a trade surplus being recorded for December, after the balance climbed out of deficit for the first time in three years in November.
New Zealand Dollar
Appetite for commodity-correlated currencies was still high at the end of last week, despite weakness in the commodity markets themselves. The New Zealand Dollar was therefore able to register bullish advances. Investor sentiment was also soothed by comments from Trade Minister Todd McClay that New Zealand still saw value in the Trans-Pacific Partnership (TPP), which many have viewed as dead in the water now that Donald Trump has withdrawn the US from the deal.
Data Released
13:00 EUR German Consumer Price Index (YoY) (JAN P) 2.0%
13:30 USD Personal Consumption Expenditure Core (YoY) (DEC) 1.7%
21:45 NZD Net Migration SA (DEC)
22:30 AUD ANZ Roy Morgan Weekly Consumer Confidence Index (JAN 29)