Yesterday’s Eurozone Sentix investor confidence gauge showed an unexpected improvement in sentiment, with the measure climbing from 11.9 to 13.3.
However, Euro gains were limited as poor industrial production data from France and Italy reduced the currency’s appeal.
Although the Australian Dollar is feeling the pressure ahead of this week’s domestic employment reports, the ‘Aussie’ was able to advance on the Euro during the local session.
The Australian Dollar was broadly supported after data showed improvement in business sentiment and home prices.
While Australian home loans unexpectedly fell by 1.9 per cent instead of advancing by 0.7 per cent as forecast, investment lending increased by 1.9 per cent in December and the house price index surged by 3.4 per cent in the fourth quarter (quarter-on-quarter).
Economists had expected the house price index to show a quarterly increase of 3.0 per cent.
The third quarter figure was positively revised to a gain of 2.4 per cent.
Year-on-year house prices were 9.3 per cent higher.
Meanwhile, the NAB measure of business confidence advanced from 6 to 8 in January.
The gauge of business conditions edged up from a negatively revised 3 to 4.
The reports even saw the ‘Aussie’ achieve a four-week high against the US Dollar as the North American currency softened ahead of Federal Reserve Chairman Janet Yellen’s address to US lawmakers.
According to forex strategist Mitul Kotecha; ‘The Aussie Dollar cracked above the 90 level on the back of the business confidence data, and generally, sentiment for the currency is becoming less negative. The bias for the US Dollar is slightly weaker, and I think it looks like it’s going to be under pressure ahead of Yellen’s speech.’
Yellen is scheduled to deliver her speech to lawmakers at 15:00 GMT.
As she has previously pushed for maintaining stimulus, her view on the Fed’s tapering scheme and the patchy US data seen in recent weeks will be of particular interest.
In other currency news, a lack of economic reports from Europe is likely to limit Euro and Pound movement, although developments in the US could have far reaching consequences.
Later today the Australian Westpac consumer confidence report could have an impact on the ‘Aussie’, as could tomorrow’s Chinese trade balance data.
Although the Australian Dollar could remain supported in the hours ahead, we forecast that the South Pacific currency could shed gains if Australia’s employment figures don’t surprise to the upside.
Euro (EUR) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,US Dollar,1.3672,
Euro,,British Pound,0.8335,
Euro,,Australian Dollar,1.5153,
Euro,,New Zealand Dollar,1.6451,
Euro,,Canadian Dollar,1.5152,
[/table]
