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All three of the commodity currencies held well last week versus the greenback with the oversold New Zealand dollar leading the gains. Data from New Zealand was mixed – although service sector activity gained momentum, producer prices and consumer spending grew at a slower pace while dairy prices fell. Nonetheless, the currency, which has come under heavy selling in recent weeks, rebounded strongly on the back of U.S. dollar weakness. The Canadian and Australian dollars will be in focus this coming week with a Bank of Canada monetary policy announcement and Australia’s fourth quarter GDP report on the calendar.
Although retail sales weakened as shown in the table below, consumer prices rose strongly and there’s enough improvement in oil, housing, employment, and trade for the central bank to leave policy unchanged. With that in mind, if the BoC is more cautious, it could cement a bottom in USD/CAD. Aside from the monetary policy announcement the country’s fourth quarter report is also scheduled for release. The Australian dollar on the other hand should continue to be supported by healthier data with the country’s manufacturing and fourth quarter GDP numbers likely to show underlying strength in Australia’s economy.