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Economic Data, the FED, and Capitol Hill and U.S Stimulus News Puts the Dollar in the Spotlight

Bob Mason
·5-min read

Earlier in the Day:

It’s was a busier start to the day on the economic calendar this morning. The Aussie Dollar was in action in the early in the day, with economic data from China also in focus.

For the Aussie Dollar

Inflation and business confidence figures were on the docket.

In the 4th quarter, consumer prices rose by 0.9%, following a 1.6% jump in the 3rd quarter. Economists had forecast a 0.7% rise.

The annual rate of inflation picked up from 0.7% to 0.9%. Economists had forecast the annual rate of inflation to hold steady at 0.7%.

According to the ABS,

  • An increase in tobacco excise and the introduction, continuation, and conclusion of a number of government schemes influenced.

  • In the 4th quarter, tobacco prices jumped by 10.9%, following a 12.5% increase in tobacco excise tax.

  • Prices for child care surged by 37.7% after the unwinding of free child care.

  • Domestic holiday travel prices increased by 6.3% after the reopening of state and territory borders.

  • There was also a 2.5% increase in prices for medical and hospital services.

  • A 7.5% slide in prices for electricity stemmed from WA Household Electricity Credit providing households with a one-off credit.

In December, the NAB Business Confidence Index fell from +12.0 to +4.0. In November, the Index had risen from +9 to +12.

According to the Monthly Business Survey,

  • A fall in business confidence across NSW, Victoria, and Queensland weighed on the headline figure.

  • The decline was attributed to a COVID-19 outbreak in Sydney at the end of the year.

  • In December, most indicators were broadly at or above pre-virus levels, with the exception of export conditions and capital expenditure.

  • While business confidence waned, the Business Conditions Index increased by 7 points to +14 points, its highest level since Sep-2018.

Looking at the key indicators, the employment sub-index rose from -4 to +9, pointing to much-needed jobs growth.

Forward orders fell from +6 points to +1 point, however, with the exports sub-index falling from -4 to -5 points.

The Aussie Dollar moved from $0.77554 to $0.77535 upon release of the inflation and business confidence figures. At the time of writing, the Aussie Dollar was down by 0.10% to $0.7739.

From China

Industrial profits were on the rise at the end of the year.

Year-on-year, industrial profits were up by 20.10% in December, after having risen by 15.50% in November.

Year-to-date, profits were up by 4.10% to December. In November, profits had been up by 2.40%, year-to-date.

The Aussie Dollar moved from 0.77553 to $0.77457 upon release of the figures.

For the Majors

At the time of writing, the Japanese Yen was down by 0.07% to ¥103.69 against the U.S Dollar, with the Kiwi Dollar down by 0.12% to $0.7227.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. Germany’s GfK Consumer Climate figures for February will be in focus later this morning.

Following news of vaccine supply shortages and extended lockdown measures, a marked fall in consumer confidence would weigh on the EUR.

Away from the economic calendar, expect COVID-19 updates to continue to influence.

At the time of writing, the EUR was flat at $1.2160.

For the Pound

It’s a particularly quiet day ahead on the economic calendar. There are no material stats to provide the Pound with direction.

The lack of stats will leave the Pound in the hands of market risk sentiment on the day.

COVID-19 news will also influence, however. A continued rise in vaccination rates and fall in infection rates should support the Pound. Any further updates on the new strains and effectiveness of vaccines will also need monitoring.

At the time of writing, the Pound was down by 0.04% to $1.3731.

Across the Pond

It’s a relatively busy day ahead on the economic calendar. December durable goods and core durable goods orders are due out of the U.S later today.

Expect the core durable goods figures to have the greatest impact, with forecasts positive for riskier assets.

Late in the day, the FED will also deliver its first monetary policy decision of the year. With the FED expected to leave rates unchanged, expect the rate statement and press conference to be the key drivers.

Away from the economic calendar, chatter from Capitol Hill and COVID-19 updates will also remain in focus, however.

At the time of writing, the Dollar Spot Index was up by 0.06% to 90.223.

For the Loonie

It’s a particularly quiet day on the economic data front, with no material stats to provide the Loonie with direction.

The lack of stats will leave the Loonie in the hands of the API and EIA crude oil inventory numbers for the week.

Away from the economic calendar, sentiment towards U.S stimulus will also influence on the day.

At the time of writing, the Loonie was down by 0.16% to C$1.2714 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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