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Forex: Aussie, NZ Dollars Sink as China Warns About Credit Risks

Forex: Aussie, NZ Dollars Sink as China Warns About Credit Risks

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • US Dollar Corrected Higher Overnight After Falling Most in Two Weeks
  • Aussie, NZ Dollars Sink as China Warns About Coal Industry Credit Risks
  • Comments from ECB’s Draghi, BOE’s Carney in Focus into the Weekend

A lull in high-profile event risk put major currencies into consolidation mode in overnight trade. The US Dollar corrected cautiously higher as markets digested the aggressive selloff played out over the preceding 24 hours. The benchmark currency slumped 0.4 percent against its leading counterparts yesterday, marking the largest daily drop in two weeks.

The Australian and New Zealand Dollar underperformed after China issued a warning about credit risks in the coal industry. The East Asian giant is Australia and New Zealand’s largest trading partner and instability there threatens the outlook for export demand. Needless to say, this bodes ill for two countries’ economic growth profile and monetary policy expectations.

The economic data docket is relatively quiet through the end of the trading week, putting the spotlight on speeches from Bank of England Governor Mark Carney and ECB President Mario Draghi at the World Economic Forum in Davos. Investors will comb through Carney’s remarks for clues about a possible revision to the BOE’s forward-guidance framework after the UK jobless rate dropped to within a hair of the 7.0 percent target level. Meanwhile, Draghi’s speech will be evaluated for rhetoric pointing to Eurozone deflation risks and possible policy steps the ECB could take to counter them.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

2:00

NZD

Credit Card Spending (MoM) (DEC)

-1.2%

-

3.5%

2:00

NZD

Credit Card Spending (YoY) (DEC)

4.7%

-

6.9%

European Session

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

9:00

EUR

Italy Retail Sales (MoM) (NOV)

0.0%

-0.1%

Low

9:00

EUR

Italy Retail Sales (YoY) (NOV)

-

-1.6%

Low

9:30

GBP

BBA Loans for House Purchase (DEC)

47300

45044

Low

12:05

GBP

BOE’s Carney Speaks at World Econ Forum

-

-

Medium

17:00

EUR

ECB’s Draghi Speaks at World Econ Forum

-

-

Medium

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.3305

1.3473

1.3585

1.3641

1.3753

1.3809

1.3977

GBP/USD

1.6440

1.6526

1.6582

1.6612

1.6668

1.6698

1.6784

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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