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China’s Smog Pushes Aussie (AUD) Lower

21 December 2016 by News Desk

As we approach the end of the week investors are looking towards the most prominent upcoming data releases, such as Canadian inflation, New Zealand gross domestic product (GDP), US personal consumption expenditure, US durable goods orders, and Canadian GDP figures; while also keeping an eye on geopolitical tensions in Europe, say industry experts FC Exchange.

Australian Dollar (AUD) Offered Little Support from Iron Ore Prospects

The Aussie dollar had little support from Australia’s iron ore outlook on Wednesday after China, the largest trading partner of the Trans Tasman nations, halted activity in many of its steel mills and faced output reductions in order to harness emissions. Thick smog has covered plenty of China’s cities including Beijing for four days running. Australia’s biggest commodity is iron ore and so these Chinese production slowdowns left the Aussie dollar no choice but to fall against more buoyant currencies.

Australian Dollar to New Zealand Dollar (AUD/NZD) Trades in Tight Range

A surprise tumble in New Zealand credit card spending in November offered the Kiwi dollar little support in Wednesday’s trading. The month of November registered an unexpected -4.2% contraction. However, in good news, New Zealand’s trade deficit was able to decrease for the third consecutive month to -NZ$705 million. Investors are now looking towards Thursday’s New Zealand gross domestic product (GDP) figures which could impact the Kiwi dollar greatly if out of line with economists’ steady 3.6% Q3 year-on-year forecast. With little other domestic data due out ahead of Christmas, the New Zealand dollar will be left to fluctuate on other events in the market.

Pound Sterling (GBP) Exchange Rate Sensitive to Political Developments

The UK registered a bigger than forecast widening in the public finances deficit in November, but looked on target to reach the borrowing forecasts set by finance minister Phillip Hammond on November 23rd. Public sector net borrowing excluding banking groups rose to 12.6B, overshooting October’s 4.8B and November’s 12.2B forecast. The pound might experience some fluctuations with Thursday’s release of Gfk’s UK consumer confidence survey if it deviates from the -8 economists have predicted. However, the sterling exchange rate has been slightly less sensitive to economic data since the UK voted to leave the EU, instead giving political developments priority in catalysing GBP movement.

Euro (EUR) recovers from 13-Year Low versus US Dollar (USD)

The euro hasn’t experienced the best week after plummeting to a 13-year low of $1.0353 against the US dollar (EUR/USD) as problems in the Eurozone continued to play out. However, those hoping for EUR/USD parity may be out of luck as the single currency recovered some ground against a basket of majors during Wednesday’s European trading. Thursday will see the European Central Bank (ECB) publish its Economic Bulletin which may cause some moderate euro exchange rate movement. However, with recent developments from Italy and Greece as well as shock events such as the attack in Berlin bringing European risk factors to the forefront of investors’ minds, the single currency may not be able to recover much of its recent losses this side of 2017.

US Dollar (USD) Exchange Rate Awaiting Durable Goods and Personal Expenditure Data

The US dollar gave back some ground to other currency majors in Wednesday’s session in a quiet day for US data. However, Thursday is poised for US dollar movement with the release of the highly influential US durable goods orders stats. The November figure is expected to contract by -4.5%, following October’s +4.6% growth. Additionally, the US will release personal consumption expenditure numbers which are also important to investors.

Canadian Dollar (CAD) Could Fall on Weaker Canadian GDP and CPI

Canadian data may be quiet in the middle of the week but the lead up to Christmas promises to contain some exciting ecostat releases in Thursday and Friday’s North American trading. The Canadian consumer price index (CPI) is due out on Thursday with economists anticipating a -0.2% contraction in the month of November, enough to pull the annual figure down from 1.5% to 1.4%. Meanwhile, Friday will see the Canadian GDP release and economists have suggested another unfavourable fall, this time from 1.9% to 1.8% in the month of October year-on-year. These events could put pressure on the loonie and see it weaken against other major currencies.


Disclaimer: This economic update is provided by FC Exchange a Global Reach Group Company, industry leaders in foreign exchange. Authorised affiliates are permitted to reuse content.


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