Pound Sterling (GBP)
Higher-than-expected average earnings have boosted Pound demand today.
The UK currency has been supported by rising wage growth, but faces more volatility tomorrow.
In addition to the Bank of England (BoE) interest rate decision, traders will also be looking to the first day of a key EU summit.
The BoE isn’t expected to change interest rates, but EU leaders could cause Pound turbulence with their remarks.
The leaders will be looking at whether the UK has made enough progress in Brexit talks to move on with trade discussions. If approved, UK negotiators may finally be able to discuss post-Brexit trade in 2018.
The Euro has dropped against the Pound but risen against the US Dollar today, in the wake of uninspiring German inflation data.
Month-on-month German inflation rose from 0% to 0.3%, while on the year an increase from 1.6% to 1.8% was recorded.
Higher inflation in Germany could eventually lead to European Central Bank (ECB) interest rate hikes, so this has been seen as a positive development.
While the Euro has made scattered gains today, these could turn to losses if Thursday’s Eurozone PMI activity measures show slowdowns as expected.
US Dollar (USD)
In the aftermath of a surprising special election, the US Dollar has dropped across the board.
The Alabama special election, convened to choose a replacement for Jeff Sessions, saw a historic upset with the election of the first Democrat in 25 years.
Doug Jones narrowly beat rival Roy Moore to claim victory, which reduced the Republican’s Senate majority and forced Donald Trump to grudgingly admit defeat.
US inflation stats will be out this afternoon, but the big news will be the evening’s Federal Reserve interest rate decision.
The Fed is expected to hike US interest rates to 1.50%; although this is largely priced in, it could still push USD higher.
Australian Dollar (AUD)
The Australian Dollar has advanced against most peers today, only dropping back against the slightly stronger Pound.
Domestic data has boosted AUD, with the Westpac consumer confidence reading showing a greater-than-expected rise in December.
The index had been forecast to fall from 99.7 points to 97, but instead rose to 103.3.
Major AU jobs data is also out on Thursday.
A rise of 19.2k employed persons has been forecast, which could boost the Australian Dollar dramatically.
New Zealand Dollar (NZD)
For the third day in a row, the New Zealand Dollar has traded higher against most peers.
With no fresh domestic data to refer to, NZD traders have been focusing on the news that Adrian Orr will be the next Reserve Bank of New Zealand (RBNZ) Governor.
Opinions are coming in thick and fast about how Orr could change RBNZ policy, with optimistic traders concluding that he might be able to reform the bank.
Among the issues that Orr will face is the New Zealand Dollar, which has been so strong as to be considered uncompetitive.
Outside of any further influence from the RBNZ news, the New Zealand Dollar could decline on Thursday night if the business NZ PMI drops as forecast.
Canadian Dollar (CAD)
An upward spike in crude oil prices has led to minor Canadian Dollar gains today.
CAD has ticked up against the Euro and risen marginally against the US Dollar.
Crude oil prices have turned volatile recently, following news of a North Sea pipeline shutdown.
When the news first hit on Tuesday, oil prices rose sharply before dropping off.
Given the shortage of influential Canadian news, the Canadian Dollar might instead be affected by tonight’s Federal Reserve interest rate decision.
If the Fed raises interest rates as expected, the US Dollar could rise sharply and lower demand for the Canadian Dollar.
This week the US Dollar was touching three-year highs when valued against a basket of major currencies. The greenback’s traditional role as one of the safe-haven currencies is helped by a domestic economy that is largely immune to the threats of the coronavirus.
Last update: 22 Feb, 2020
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The threat of a proxy war between the US and Iran in Iraq has pared back some of the recent gains of “risk-on” currencies.
Last update: 8 Jan, 2020