aud fundamentals

Canadian, New Zealand, Australian Dollars the Weakest of the Majors as Oil Tumbles 7.5%

Monday, 12 January 2009 20:52:11 GMT  |  Terri Belkas, Currency Strategist

The commodity currencies - which include the Canadian dollar, New Zealand dollar, and Australian dollar – all fell back on Monday due to a variety of factors. Waning risk appetite sapped demand for carry trades, which hurt commodities like oil and higher-yielding currencies, while benefiting lower-yielding currencies, such as the Japanese yen and US dollar. Disappointing news from the Bank of Canada certainly did not help to prop the Canadian dollar higher either, as their Business Outlook Survey for Q4 showed that almost all indicators of sentiment fell to the their lowest levels since the survey began in 1997. Indeed, the survey reflected that firms expect sales growth to slow over the next 12 months, while sentiment on investment and employment has turned pessimistic, all of which suggests that the Canadian economy is in for a sharp slowdown, if not contraction, in coming months. Furthermore, inflation expectations for the next two years have declined "considerably" with commodity prices, and with a record number of firms reporting tighter credit conditions, the survey adds to evidence that the Bank of Canada will cut rates against on January 20. Looking ahead to the rest of the week, most of the event risk will be contained to the US dollar and euro, but on January 14, the Australian unemployment rate is anticipated to pick up to 4.5 percent from 4.4 percent while the net employment change is forecasted to fall negative for the second straight month by 20,000. The latter report tends to have a greater impact on the Aussie since the figure rarely meets expectations and can lead to volatile short-term price action for the Australian dollar immediately following the news at 19:30 EDT. The other important thing to watch is the status of risk, as an increase in market-wide volatility could send the commodity bloc diving lower.


**For a full list of upcoming event risk and past releases, go to the DailyFX Calendar

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