Yet more data favoured the Australian Dollar yesterday, keeping the ‘Aussie’ largely on the advance. The AiG performance of services index for December leapt higher, clocking in at 57.7 compared to November’s score of 51.1. Chinese PMIs were also supportive of the Australian Dollar, with the Caixin services and composite indices both posting notable rises. A positive outlook for the Chinese economy also raises the prospects of the economy of Australia as China is the nation’s largest trading partner.
The Australian Dollar could find domestic data supportive for a fourth day running thanks to the forecasts for this morning’s November trade balance data, which expect the deficit to narrow by nearly -AU$1 billion to -AU$550 million.
Bank of England (BoE) Chief Economist Andy Haldane took the edge off a strong UK services PMI release yesterday, allowing the AUD/GBP exchange rate to hold strong gains. The UK services and composite indices rose above forecasts to 56.2 and 56.7 respectively, making a full house for PMIs that rose in December. A later speech by Haldane included warnings that consumer spending was set to slow in 2017 as higher inflation squeezed household incomes, and the comments undermined the positivity generated by the data. Service sector strength relies on consumer spending, so while December’s PMI was strong, the outlook remains less-than-rosy.
The Euro was edging higher versus the Australian Dollar, while racking up bullish gains elsewhere, thanks to positive Eurozone data released early in the European session. Germany’s construction PMI climbed by one point to 54.9, while the retail indices for Germany, France and the Eurozone all escaped contraction territory. Later, producer price index figures for the currency bloc showed surprise growth on the year and a smaller than expected slowdown in the pace of growth on the month.
A slew of German and Eurozone data concludes tomorrow with Eurozone retail sales figures for November. A weakened pace of year-on-year growth is expected.
The US Dollar slumped yesterday with employment data largely exacerbating a sell-off thanks to the ‘Greenback’s impressive strength at the start of the year. The ADP employment change figure for December clocked in significantly below-forecast at 153,000, while the previous month’s figure was downgraded to 215,000. This had superstitious traders worrying that Saturday’s important non-farm payrolls report would also disappoint. But initial jobless claims hit a 43-year low of 235,000 in the final week of December and the ISM non-manufacturing composite index held steady at 57.2 instead of weakening.
Tomorrow morning’s key non-farm payrolls report is expected to reprint at 178,000.
The only Canadian data released recently was published early this morning and showed a showdown in the pace of industrial product prices and a worse-than-expected decline in the raw materials price index in November. The Canadian Dollar was largely soft, despite a near 1% rise for crude oil taking prices to just short of a 17-month high. The rise had been caused by news that Saudi Arabia had started talks with customers about reducing sales of crude by up to -7% as the nation begins to cut production as agreed at the end of last year.
Canadian unemployment data could weaken the ‘Loonie’ early tomorrow morning due to the forecast rise in joblessness from 6.8% to 6.9%.
The New Zealand Dollar was on mixed form yesterday, weakening against the Australian Dollar, but also managing to register strong gains versus a number of its peers. The day’s strong Chinese data helped the ‘Kiwi’ to firm, while the recent sell-off sparked by falling diary prices appeared to be finally running out of momentum.
January 6th 11.30 AUD Trade Balance (Australian dollar) (NOV) -AU$550m
January 6th 21.00 EUR Eurozone Retail Sales (YoY) (NOV 1.9%
January 7th 00.30 CAD Unemployment Rate (DEC) 6.9%
January 7th 00.30 USD Change in Non-farm Payrolls (DEC) 178k
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