Carney and Powell Could Deliver More Swings in the GBP and USD

Market focus on trade talks is evidence in the early moves today. Can FED Chair Powell hit reverse on the Dollar?
Bob Mason
Powell Speech
Federal Reserve building with twenty dollar bill on grunge texture

Earlier in the Day:

Economic data released through the Asian session this morning included electronic card retail sales figures out of New Zealand, and new home loan sales and business confidence figures out of Australia.

For the Kiwi Dollar,

According to figures released by NZ Stats, card sales rose by 1.8%, month-on-month, in January. Reversing most of December’s 2.3% slide, the figure also came in ahead of a forecasted 1.4% increase.

  • Sales were driven by spending on durables, which increased by 5.1%. The increase reversed a 4.2% slide in December.
  • Spending increased in 5 of the 6 retail industries. Spending on apparel came a distant second, rising by 2.2%. Spending had fallen by 1.7% in December.
  • Core retail spending, which excludes vehicle-related industries, rose by 2.2% in January, reversing a 1.7% fall in December.

The Kiwi Dollar moved from $0.67325 to $0.67331 upon release of the figures. At the time of writing, the Kiwi Dollar was down by 0.10% to $0.6726. The figures were a much needed positive, but will unlikely be enough for the RBNZ tomorrow morning…

For the Aussie Dollar,

Home loans fell by 6.1%, month-on-month, in December, which was worse than a forecasted 2.8% decline. In November, home loans had fallen by 0.9%. According to figures released by the ABS,

The NAB Business Confidence Index came in at 4 in January, coming in ahead of a forecasted and December 3.0.

  • The Business conditions index increased by 4 points to +7, the rise attributed to an increase in trading (+10), profitability (+5) and employment (+5).
  • The rise in the confidence index failed to pull the index above the long-run average.
  • Forward indicators were described as mixed in January.
    • Forward orders rose to above average.
    • Capex and capacity utilization declined, leaving capacity utilization at just above long-run averages.
    • Most industries saw capacity utilization fall to below average levels, which may impact hiring trends down the road.
    • The NAB also noted that the RBA’s next move on interest rates could be down rather than up when considering the current trajectory of growth and rising downside risks.

The Aussie Dollar moved from $0.70632 to $0.70748 upon release of the figures. At the time of writing, the Aussie Dollar stood at $0.7076, up by 0.20% for the session.


The Japanese Yen was down by 0.19% to ¥110.59 against the U.S Dollar. Risk on sentiment through the session weighed on the Yen in the early part of the day. The Nikkei was the main beneficiary, rallying by 2.66%.

A lack of negative commentary on trade provided support, leading to a 0.85% rise in the CSI300 and a more modest 0.16% rise in the Hang Seng. The ASX200 was up by 0.34% at the time of writing.

The Day Ahead:

For the EUR

It’s another quiet day on the economic calendar. Focus through the day will likely remain on trade war chatter and any updates on Brexit negotiations between the EU and Britain. No deal would be a dire outcome for Britain, but the EU economy would certainly not be unscathed.

The EUR has been largely unaffected by the Brexit chatter in recent months. When considering the possible impact of a no-deal on certain economies, including Germany’s, sensitivity may begin to kick in.

At the time of writing, the EUR up by 0.02% at $1.1278, early support coming from the risk-on sentiment.

For the Pound

There are no material stats scheduled for release out of the UK to provide direction through the day.

While there are no stats, BoE Governor Carney is scheduled to speak and could provide the Pound with further direction should there be any further comments on monetary policy.

Following disappointing economic stats out of the UK on Monday, there’s little reason for Carney to deliver a hawkish stance, though it wouldn’t be the first time that Carney has caught the markets off-guard.

On the Brexit front, any updates on talks between British PM May and Opposition leader Corbyn will also influence through the day, as would any comments from Brussels. British PM May is scheduled to update Parliament today, while the government has also confirmed that there will be no meaningful vote this week.

The Pound needs a no-deal scenario to come off the table to bring $1.30 levels back.

At the time of writing, the Pound was up 0.06% at $1.2863.

Across the Pond

Economic data scheduled for release out of the U.S is limited to December’s JOLTs job openings. Following January’s nonfarm payroll figures, we can expect the Dollar to largely ignore the numbers, barring particularly dire numbers.

Outside of the numbers, FED Chair Powell is scheduled to speak later in the day. A renewed love for the Dollar comes in spite of the FED’s more dovish stance on rates. We can expect the Dollar to respond to any policy chatter.

While FED Chair Powell will influence, the focus will remain on updates on from the U.S administration on trade talks with China and where things stand on the government funding deadline.

At the time of writing, the Dollar Spot Index was up by 0.01% to 96.069.

For the Loonie

There are no material stats scheduled for release through the day. Crude oil prices will likely provide direction, with sentiment towards the U.S – China trade talks and the global economic outlook influencing alongside OPEC’s monthly report due out later in the morning.

The Loonie was up by 0.11% to C$1.3288, against the U.S Dollar, at the time of writing, support coming from a pickup in crude oil prices and risk appetite across the broader market.

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