EUR/USD at Nine-Year Low, Australian Dollar (AUD) Advances, Chinese Trade Improves

The Euro to US Dollar exchange rate was languishing in the region of a nine-year low amid European Central Bank stimulus speculation and positive economic reports for the US. The day’s disappointing German Wholesale Price Index did little to support the common currency. Given that the Eurozone slid into deflation at the close of 2014, it is widely expected that the ECB will introduce additional stimulus when it gathers on the 22nd of this month, and the prospect of quantitative easing rises with every negative European ecostat. The US Dollar, meanwhile, has experienced volatility this week as a result of mixed opinions regarding the odds of the Federal Reserve increasing interest rates in the first half of this year. Friday’s disappointing wage growth/participation rate data highlighted weaknesses in the US labour market and saw investors push back their expectations for the first increase in borrowing costs.

However, since then the President of the Federal Reserve Bank of Atlanta has stressed how well the US economy is performing and insinuated that rates should rise by the middle of the year. The US Dollar has also been supported by above forecast JOLTS Job Openings and NFIB Small Business Optimism data. The EUR/USD exchange rate is currently trending in the region of 1.1784 – down 0.4% on the day’s opening levels. On Wednesday a number of factors could cause movement in the Euro to US Dollar pairing, including the Eurozone’s Industrial Production figures and the US Advance Retail Sales report. A slide in US retail sales could help the Euro recoup some of its recent losses.

In other currency news, the Australian Dollar gained on rivals like the US Dollar and Euro after China released better-than-expected trade figures for December and the price of gold climbed in a risk-off environment. Although economists had projected a 6.0% annual increase in exports at the tail end of 2014, they actually jumped by 9.7% - seriously outweighing a -2.4% slide in imports and causing China’s trade surplus to swell to record levels. The Australian Dollar failed to post much of a gain against the Pound in spite of the pace of UK inflation slowing to a 15-year low. The UK’s 0.5% CPI print initially provoked Sterling losses, but the British currency staged a rebound as investors bet that the slide in consumer prices won’t prevent the Bank of England from increasing interest rates. The New Zealand Dollar, like its Australian counterpart, benefited from the positive Chinese data and the improvement in gold prices.