Heavy smog in China curbed industrial activity for the fourth day in a row, lowering demand for raw minerals such as coal and iron ore. One of the busiest ports in the country, Tianjin, has stopped handling non-liquid imports like minerals after many factories were ordered by the government to reduce their output. This has weakened iron ore prices, causing the Australian Dollar to fall versus the majority of its peers.
Wider-than-expected UK public deficits allowed the struggling Australian Dollar to make advances against the Pound yesterday. Public sector net borrowing in November had been expected to show a deficit of -£11.6 billion compared to October’s -£4.3 billion shortfall, but instead revealed a -£12.2 billion overspend. Additionally, the Office for Budget Responsibility (OBR) forecast that borrowing would rise over the next four months to the end of the financial year.
UK consumer confidence is expected to remain in negative territory today, with the GfK survey for December forecast to reprint at November’s level of -8.
Improved outlooks for monetary policy and the Italian banking sector saw the Euro trending bullishly yesterday. Ilmars Rimsevics commented that quantitative easing, while providing stability, had not boosted growth in the Eurozone; the third European Central Bank (ECB) policymaker in two weeks to offer a downbeat assessment of the policy. The Euro rose on trader hopes that this meant the ECB may lean towards an early end, or taper, of asset purchasing. Additionally, news the Italian Parliament had approved a €20 billion rescue package for Italy’s banks helped calm fears of a banking sector crisis.
The European Central Bank (ECB) will publish its next Economic Bulletin this evening.
The US Dollar was benefiting from thin trading conditions thanks to the positive outlook for the US economy and monetary policy in 2017. However, yesterday saw the ‘Greenback’ weaken due to high demand for the Euro. With nothing immediate on the calendar and trader eyes on the upcoming durable goods orders figure, which is expected to show a strong decline, the US Dollar was unable to find support.
Durable goods orders data will be released very early tomorrow morning. The US Dollar could have a fall in store, as predictions for the report have a -4.5% decline on the cards.
An empty calendar yesterday and the prospect of a busy data day tomorrow saw the Canadian Dollar edge lower. Consumer price index data is set for release tomorrow and is expected to show a slight weakening in price growth from 1.5% to 1.4% – not something investors want to see in a country where the central bank isn’t expected to adjust policy until 2018 at the earliest.
Disappointing trade figures kept the New Zealand Dollar largely soft yesterday. The trade balance deficit was expected to drop from a downwardly-revised -NZ$815 million to -NZ$500 million, but only managed to creep down to -NZ$705 million. This was due to a below-forecast level of exports at NZ$3.86 billion and larger-than-expected imports at NZ$4.56 billion. Credit card spending also declined -4.2%.
Headline GDP figures for the third quarter are expected to show solid growth of 3.6% when they are released this morning.
December 22nd 08.45 NZD Gross Domestic Product (YoY) (3Q) 3.6%
December 22nd 11.01 GBP GfK Consumer Confidence Survey (DEC) -8
December 22nd 20.00 EUR ECB Publishes Economic Bulletin
December 23rd 00.30 USD Durable Goods Orders (NOV P) -4.5%
December 23rd 00.30 CAD Consumer Price Index (YoY) (NOV) 1.4%
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