US dollar struggles on weak GDP figures


Australian Dollar:

The Australian dollar opened weaker Thursday as downward pressure on the US92 cent handle continued to be applied. Asian trade began and the Aussie dollar moved almost horizontally however there was an element of a downhill trend amongst the sideways trade. The small range in the morning was due to the Private Capital Expenditure figures being released just before midday which has been billed as the highlight of the week. In several days with very little volatility investors were counting on these numbers to provide a spark to the dormant AUD and they were not disappointed. The Capex data came in at -4.2 per cent where -1.6 per cent had been forecast. The data is important as it gives a good indication as to how Australia is transitioning from a nation reliant on mining to a country with more diversified interests. Although the figures appear to be weaker than expected the market received the numbers as positive as other industries other than mining appear to be picking up the pace. The highlight appeared to be equipment, plant and machinery up 2.8 per cent whilst mining was down as expected 10 per cent. The AUD gained on the back of this data and rallied 37 points to 0.9258 setting the tone for the rest of the session. As the day went on the Aussie dollar continued to rally up over half a per cent since the days open against the Greenback to 0.9276. Overnight the strong AUD continued, assisted by poor US GDP figures managing to break through the US93 cent barrier touching highs of 0.9314. The Aussie opens today stronger against the US at 0.9308. Heading into the weekend Private sector credit is the only data out locally as investors will watch an array of US numbers to finish off the week.

  • We expect a range today of 0.9265 – 0.9350


New Zealand Dollar:

The New Zealand dollar lost the most ground of all the majors on Wednesday against the US dollar dropping nearly three quarters of a per cent. The losses were spurred by weak business confidence figures released on Wednesday and with no local data out today the NZ dollar managed to consolidate into a tight range with a slight bias to the downside. The higher yielding currency did make a failed attempt to break the 85US cent handle during the day however came up short, settling in 10 points below the open at 0.8487 against the Greenback. Overnight the New Zealand dollar could not shake its losing trend on the back end of the week and despite surprisingly low GDP figures from the US the Kiwi still gave up ground against the Greenback which seemed to lose against almost all other majors. The NZ dollar opens this morning at 0.8465 nearly half a cent lower than Thursday. Early this morning investors will turn their eyes to NZ building consents to give the Kiwi final direction before heading into the weekend.

  • We expect a range today of 0.8440 – 0.8530


Great British Pound:

The British Pound spent the majority of Thursday drifting higher against the US dollar as broad Greenback weakness was seen across the market. The weakness comes a day after the US dollar showed resilience beating out most of the major currencies purely on market sentiment. The British Pound managed to gain 15 points versus the USD over the course of Asian trade from the open of 1.6712. The Sterling similarly gained against the Kiwi which was also showing signs of weakness towards the back of the week climbing just under half a cent to 1.9716. The GBP’s biggest move for the day came against the Aussie dollar which was the most volatile currency during Thursday. The British Pound lost 70 points versus the AUD instantly on the back of strong Capex data out of Australia and kept falling through the rest of the day touching lows of 1.8013. Overnight the GBP struggled to take full advantage of the weak US GDP figures and opens today at the same level as Thursday 1.6712 versus the US dollar. The AUD however continued its bullish trend and rallied a further half a cent against the British Pound overnight and opens today at 1.7980. Conversely the NZ dollar which has started to lose momentum at the back end of the week, softened against the Sterling opening at 1.9730 up 30 points from Thursday. Investors will turn their eyes to GfK consumer confidence to end the week however the US markets will be watched closely with a full economic bill of data heading into the weekend.

  • We expect a range today of 1.7910 – 1.8005


Majors:

Heading towards the end of the week the US dollar’s sentiment seems to have reversed, loosing most of the gains against the Euro achieved over the last 7 days. Although staying in the usual tight range the Euro did manage to gain just shy of 20 points against the Greenback.

There was very little action in Europe overnight with a French and German bank holiday leaving investors watching the US numbers for some direction. The focus on the US economy did not disappoint as an array of unique data was released. The US preliminary GDP figures showed a contraction of 1.0 per cent. This was the first fall in US GDP since early 2011. The US dollar was lower on the back of this news across the board however these weak figures were follow on affects from the harsh winter weather experienced over the Christmas period. Taking this into account softened the US dollar’s fall, however analysts had not predicted the contraction to be as large at 1 per cent. Later on in US trade the unemployment claims fell and pending home sales increased however the rise was well short of forecast. These data prints helped the US retain some ground as we see the Euro opening only marginally stronger at 1.3601 against the Greenback this morning.

Heading into the weekend investor’s eyes will watch spending and revised consumer sentiment from the US for direction with US trade balance, unemployment and manufacturing figures the main attraction for next week.


Data releases:

  • AUD: Private Sector Credit m/m
  • NZD: Building Consents m/m
  • JPY: Household Spending y/y, Tokyo Core CPI y/y, National Core CPI y/y, Unemployment Rate, Prelim Industrial Production m/m, Housing Starts
  • GBP: GfK Consumer Confidence
  • EUR: German Retail Sales m/m, Italian Prelim CPI m/m
  • USD: Core PCE Price Index m/m, Personal Spending m/m, Personal Income m/m, Chicago PMI, Revised UoM Consumer Sentiment, Revised UoM Inflation Expectations, FOMC Member Plosser Speaks

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