USD - United States Dollar
The US dollar failed to hold onto gains enjoyed on the back of Wednesday's equity-market decline. Instead, demand for USD drifted lower as sentiment improved and demand for equities rebounded. US GDP in the fourth quarter expanded at just 4%, well down on the Q3 surge and 2.5% down on Q4 2019. While a grim reading, the soft print was hardly a surprise for investors given the resurgence in COVD-19 case numbers through the last 3 months of 2020. Despite little evidence the pandemic will end in the near term, early high frequency data sets suggest the promise of fiscal stimulus and the national vaccine roll out will prompt an uptick in activity through Q1. With US jobless claims down on last week there is a suggestion the USD downturn may have reached the bottom.
The euro climbed back through 1.21 as German CPI jumped in January and confidence in the euro area was better than first expected. While the single currency has struggled to extend back toward highs at 1.23, it remains relatively well supported above 1.20 for now. The big test for the common currency lies ahead with growth forecasts suggesting the continent will be slow to recover from the COVID-19 pandemic, left behind by the UK and US, as disparities in vaccine roll outs begin to emerge.
Sterling benefitted from data outside the UK yesterday. GBPUSD touched 1.3635 at the lows yesterday morning but recovered to 1.3745 after the GDP release.
While the AUD has recouped Wednesday’s equity market drop, the break opened the door for a change in the broader narrative. With the currency struggling to extend beyond 0.78 US cents and the run of higher highs and higher lows now over, we anticipate the AUD will remain range bound with extensions toward 0.7820 rebuffed and contractions approaching 0.75 supported. With the broader narrative largely unchanged through the last month, we are looking to any signal that may force a shift in investor outlook as the catalyst to break direction.
1.209 - 1.215 ▼GBP/USD:
1.366 - 1.374 ▼AUD/USD:
0.763 - 0.769 ▼USD/CAD:
1.274 - 1.287 ▼