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Australian trade gap drops into deficit

Published: Friday 05 January 2018

  • Sterling drops on car and retail data
  • USD awaits employment report
  • Canadian employment data expected to be mixed
By David Johnson

Australian trade balance weakens AUD

The Australian Dollar weakened by a cent against the Pound overnight after the trade balance fell into deficit in December. The A$628 million shortfall was largely fuelled by a rise in imports, so you could read positive things into that but the sluggish exports numbers are a cause for concern, particularly with the Aussie Dollar being so weak; a factor that should encourage overseas demand for Aussie goods.
Pound also weaker this morning

For its part, the Pound has weakened this morning after news that retail sales in December fell for the fifth December in a row and new car sales in 2017 were weaker at a faster pace than we have seen since 2009. Unsurprisingly perhaps, diesel sales fell by 17%.
Silver lining? Sterling strong against US Dollar

The Sterling – US Dollar rate is back up at levels we last saw in September. Whether that is due to all the speculation that the US President is losing his marbles, or the contents of this book that belittles him, or some other factor,  is open to debate. However, the USD gained some ground after the rather hawkish Federal Reserve minutes, but those gains have largely been given up over the last 24 hours. Short term, the range is $1.33 to $1.36.
US Dollar - Euro exchange rate falls
The Dollar is also weaker against the Euro. We are seeing some of the highest exchange rates in this pair since September 2017 and the last time we were above here was December 2014. Consequently, a push to slightly higher levels could encourage a significant rally. 

This afternoon brings the US employment report, which we believe will show employment growth but at a slower pace than previous months. Just 170,000 fresh jobs are expected to have been created in December but that should tip the unemployment rate down to 4.0% from the previous 4.1%. Mixed news, then, if the forecasters are right, and, with the antipathy being shown towards the USD at the moment, that would most likely weaken the US Dollar.
Key Canadian data expected - could we see a weaker CAD?

This afternoon also brings Canada’s employment data and, by way of contrast, many analysts believe the unemployment rate in Canada stepped up a tick in December from 5.9% to 6.0%. That isn’t good news if it’s true. Many other countries are starting to see labour market improvements, so a contrary step for Canada would stand out and the Canadian Dollar would most likely suffer.
21st Century problems?

And, it is perhaps hard to believe, but it was only in 2017 that the law in Oregon allowed people to operate petrol pumps themselves rather than have a gas station attendant do it for them. As you might imagine, the internet is having a field day in poking fun at Oregonians who are being dragged into the 21st Century. Just Google ‘Oregon’ and ‘pump your own gas’ and enjoy. P.S. I take no responsibility for anything offensive you might encounter.
Have a great weekend, though!
I lost my job after I gave up my seat to a blind guy on the bus. It’s ok though, I never really wanted to be a bus driver anyway. 

Today's Major Economic Releases

Market BST Data/Event Previous Expected
EUR 10:00 EU: Consumer Price Index Flash Estimate 1.5% 1.4%
EUR 10:00 EU: Core Consumer Price Index Flash Estimate 0.9% 1.0%
CAD 13:30 Canada: Employment Change 7.9k 1.8k
CAD 13:30 Canada: Trade Balance -1.5b -1.2b
CAD 13:30 Canada: Unemployment Rate 5.9% 6.0%
USD 13:30 US: Average Hourly Earnings 0.2% 0.3%
USD 13:30 US: Non-Farm Employment Change 228k 190k
USD 13:30 US: Unemployment Rate 4.1% 4.1%
CAD 15:00 Canada: Ivey Purchasing Managers' Index 63.0 62.2
USD 15:00 US: ISM Non-Manufacturing Purchasing Managers' Index 57.4 57.6

For more information, infographics and the latest currency insights, visit www.halofinancial.com/news