The Australian Dollar was on mixed form on Friday, despite the latest figures showing a surging trade balance in November. The ‘Aussie’ was down against the Canadian Dollar and US Dollar, but doing well against its other peers. Exports jumped by over AU$2 billion in November, taking the trade balance to AU$1243 million, the first trade surplus in three years. This was significantly better than the projected deficit of -AU$550 million, which itself would have represented a more-than-halving of October’s shortfall.
This week kicks off with today’s AiG performance of construction index for December – one of just two impactful Australian releases due over the coming days.
A lack of UK data allowed the Australian Dollar to Pound Sterling exchange rate to extend bullish gains on Friday. Fears of a ‘Hard Brexit’ continued to weigh on GBP, while the day’s single, low-impact ecostat failed to cheer traders. Growth in UK labour costs may have accelerated in the third quarter, climbing from 1.9% to 2.3%, but accompanying figures showed that productivity remained low. This is problematic, as without output growth employers will have little room in their cash flows to award pay rises.
A busy data day on Wednesday breaks up an otherwise lacklustre UK data calendar. Amongst the slew of reports will be the latest trade balance figures for November.
Eurozone data was largely positive on Friday, but the Euro remained weak overall, pressured lower by a tenacious US Dollar ignoring the latest poor US ecostats. The European session started badly with a -2.5% slump in German factory orders on the month and a -1.8% drop in retail sales in November. But later Eurozone confidence data showed sentiment in all sectors rose above forecasts. Additionally, retail sales in the currency bloc saw growth slow by less-than-expected, falling to 2.3% instead of 1.9% from an upwardly-revised 3%.
Amongst today’s Eurozone data is the Eurozone Sentix investor confidence index for January.
As expected, the US unemployment rate edged higher in December, rising from 4.6% to 4.7%. Additionally, the non-farm payrolls report clocked in almost -20,000 below forecast, showing 156,000 jobs had been created. However, November’s figure was revised up by a commensurate level, keeping the overall outlook on the jobs market virtually unchanged. Additionally, year-on-year growth in average hourly earnings outpaced expectations, rising from 2.5% to 2.9% – a positive sign for those expecting that the Fed will have to tighten monetary policy multiple times this year as inflation rises.
As is often the case, the most influential US data comes at the end of the week, with early Saturday morning bringing the December advance retail sales report and the preliminary University of Michigan confidence index for January.
Predictions of a fall in employment and an increase in the jobless rate weakened the Canadian Dollar to begin with on Friday, but the data smashed expectations and the ‘Loonie’ trend was quickly reversed. While unemployment did climb 0.1% to 6.9% as expected, the participation rate unexpectedly increased; this meant more people were active in the labour sector, which drove the joblessness figure higher. The employment change data impressed; after a 10,700 person increase in November analysts had expected job losses of -2,500 in December, but were instead surprised by an increase in hiring of 53,700.
Canadian building permits data for November is set for release on Wednesday.
New Zealand Dollar
The New Zealand Dollar was on mixed form, with a closer look at the ‘Kiwi’s performance revealing that it lacked any real momentum of its own. Gains were made against weaker currencies such as the Euro and Pound Sterling, but elsewhere the New Zealand Dollar dipped. The ‘Kiwi’ has been hampered by a dearth of domestic data to provide support; expectations of no change to monetary policy for much of this year can only support it so far.
While there is no New Zealand data of note on the economic calendar, tomorrow’s Chinese consumer price index for December could spark significant volatility amongst risk markets.
January 9th 09.30 AUD AiG Performance of Construction Index (DEC) 46.8
January 9th 20.30 EUR Eurozone Sentix Investor Confidence (JAN)
January 10th 12.30 CNY Consumer Price Index (YoY) (DEC) 2.3%
January 11th 00.30 CAD Building Permits (MoM) (NOV)
January 11th 20.30 GBP Visible Trade Balance (Pounds) (NOV)
January 14th 00.30 USD Advance Retail Sales (DEC) 0.7%
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