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GBP and USD both on the rise, with APAC major counterparts NZD and AUD slightly underperforming

  • GBPNZD lifted as UK inflation data beating forecast
  • US Dollar continues rally given positive economic data
  • Australia job report missed forecast, leading to mixed results

GBPNZD found its support from the surprise improvement in the UK inflation rate. While forecast pointed towards 0.5%, the actual release instead landed at 0.7%, showing strength in local economy. This has given investors much confidence and incentive to favor GBP over its rivals despite the monthly inflation rate remained negative in January. However, investors should beware of the diminishing impact from vaccine rollout which has been supporting GBP for quite some time. On the other hand, should Friday’s manufacturing and services PMI data beat expectations, GBP will likely continue the upbeat momentum, as the service sector remains the primary contributor to the UK GDP. Meanwhile, a slightly stronger USD and lack of market risk appetite generally weakened NZD at this moment.

The US Dollar Index extended gains to 90.94 at press time, helping USD to continue the current rally. Key drivers are economic data, including retail sales and producer price index. Core retail sales grew 5.9% MoM in January, compared with the 1.0% forecast and the 1.8% fall in December. Moreover, the Producer Price Index (PPI) surprisingly hit 1.3% MoM. This has far exceeded the forecast at 0.3% and is the highest since 2009. It suggests that prices for commodities sold for personal consumption, capital investment, government and exports are increasing at a much quicker pace.

In APAC, the mainland Chinese market resumed trading after a long break from the Lunar New Year holiday. The markets are overall quite positive, leading to stronger investor confidence. Hong Kong’s Hang Seng Index surged over 3% this week and reached above 31,000 for the first time since June 2018. However, situation in Australia is rather mixed. January employment added 29.1k versus the forecast at 40k, but unemployment rate improved to 6.4% versus the consensus at 6.5% and a prior landing at 6.6%. AUDUSD is currently hovering around 0.7755 at press time, dropping from the previous high at 0.7772.