The US Dollar and Japanese Yen may decline as European and US equity index futures are trade higher, pointing to an upswing in investors’ appetite for risky assets that curbs demand for the safety-linked currencies. Australia’s Trade Balance deficit widened to –A$2.3 billion in December from a revised –A$1.73 billion in the previous month, a somewhat better print than the –A$2.4 billion reading expected by economists ahead of the release, as imports gained 5.8% to outpace a 4% rise exports. Overseas purchases of fuels and lubricants as well as crude oil led inbound shipment volumes higher, rising 26% and 33% respectively. Oil prices in terms of the Australian Dollar rose to the highest in 14 months in December while data from the Australian Industry Group showed that the manufacturing sector shrank for the first time since July over the same period, hinting that import readings rose on the back of higher costs rather than stronger demand from a rebound in industrial activity. Indeed, fourth-quarter producer price figures showed that the cost of petroleum products led all other manufacturing input goods, adding 0.7%. An index tracking UK Consumer Confidence rose more than economists expected in January according to a report from the Nationwide Building Society, rising for the first in four months. Still, the metric remains below its post-crisis high of 75 registered in September of last year. Nationwide chief economist Martin Gahbauer attributed the outcome to “positive signs from the manufacturing sector and labor market,” but cautioned that “confidence is likely to remain fragile for some months.” Euro Zone Retail Sales are expected to rise 0.4% in December after shrinking in the previous month, but the outcome is unlikely to command significant attention after yesterday’s release of a similar result from Germany – the currency bloc’s largest economy – was driven solely by food and clothing sales and so was easily chalked up to the winter holiday season. Looking ahead, the retail landscape is far from encouraging. Indeed, Bloomberg’s Euro Zone Retail PMI gauge showed that the sector shrank at the fastest pace in 10 months in January while the unemployment rose to a record high of 10% in December, pointing to downward pressure on disposable incomes that is likely to curb spending. On balance, risk sentiment is likely to remain the primary driver of price action. Stock markets rose in Asia while European and US equity index futures are trading higher ahead of the opening bell, pointing to an upswing in investors’ appetite for risky assets that promises to boost most major currencies against the safety-linked US Dollar and Japanese Yen.

Source