Although British economic data showed that the RICS House Price Balance met with expectations in December, the Pound softened versus most of its peers. The depreciation can be linked to speculation that the latest domestic average wages report, which failed to accelerate in line with the median market forecast, will add to headwinds causing Bank of England (BoE) policymakers to delay a benchmark rate hike. Additional Sterling depreciation can be linked to the Pound tracking stock price losses with the global rout extending following significant declines in Asian markets.
Euro (EUR)
On European Central Bank (ECB) interest rate decision day the single currency advanced versus its currency competitors thanks to heightened demand for carry trades. With market sentiment significantly dampened, traders have been taking advantage of the ECB’s accommodative policy for carry trading. Also supportive of demand for the shared currency today is speculation that the ECB will avoid easing monetary policy further. ECB President Mario Draghi is expected to deliver a dovish speech but this may not have a huge impact on the markets given he is likely to parrot previous concerns.
US Dollar (USD)
Although the strength of the Euro has limited US Dollar gains, the North American asset advanced versus many of its peers thanks to demand for safe-haven assets. However, many traders are concerned that the China-led slowdown in emerging markets will cause Federal Reserve policymakers to halt hiking rates until global economic conditions improve. Later today, US labour market data has the potential to provoke ‘Greenback’ (USD) volatility.
Australian Dollar (AUD)
With market sentiment considerably dampened in response to the global stock market rout, demand for the Australian Dollar weakened. Adding to headwinds was less-than-ideal domestic data which saw November’s New Home Sales contract by -2.7%. Also, January’s Consumer Inflation Expectation came in at 3.6%, down from December’s 4.0%.
New Zealand Dollar (NZD)
Although New Zealand’s economic data produced mostly positive results, trader risk aversion strategies continue to weigh on demand for the ‘Kiwi’ (NZD). Concerns regarding China’s economic struggles has caused dairy prices to extend losses further. This has seen the New Zealand Dollar decline versus nearly all of its currency rivals. The problems seen in China’s equity markets, led by a drop in the Shanghai Composite Index by over 3.2%, is having a particularly detrimental impact on the high-yielding South Pacific asset.
Canadian Dollar (CAD)
Although crude oil prices have resumed depreciation, holding below $28 a barrel, the Canadian Dollar advanced versus a number of its rivals on Thursday morning. The appreciation, albeit comparatively fractional, can be linked to positive sentiment following the Bank of Canada’s (BOC) decision to avoid loosening monetary policy.
