Construction work done in Australia in the fourth quarter contracted for a second straight quarter, which could be a potential drag on economic growth. Construction work declined 3.1% in Q4, compounding the -2.8% recorded in Q3, and came in below economists’ estimates of a 0.4% expansion.
The Aussie was trading at its highest level versus the US dollar in almost a week before the data release. The FX pair subsequently declined to 0.7175. AUD/USD appears to be struggling to overcome Fibonacci resistance at 0.7203, which is the 61.8% retracement of the January 31 to February 12 decline. The 200-day moving average sits above as additional resistance at 0.7262.
AUD/USD Daily Chart
UK shop price inflation highest in six years
Prices in UK shops rose for the fourth straight month in February, data from the British retail Consortium (BRC) released this morning showed. Shop price inflation reached its highest since March 2013, rising 0.7% from a year earlier as non-food prices rose for the first time in six years, the report stated.
The BRC commented that supply chain pressures had been building over the past two years following the pound’s depreciation in 2016 and the rise in oil prices last year. BRC expects heavy price discounting to return, given weak discretionary spending and intense competition.
The pound was flying high after yesterday’s news on a possible Brexit delay and today’s data only put a small dent in the pound’s three-day advance versus the US dollar. A marginally firmer US dollar on profit-taking also pressured the FX pair from 5-month highs.
GBP/USD Daily Chart
More European sentiment indices
The Euro-zone releases consumer confidence, business climate and industrial confidence for February today. Overall, sentiment indicators have been weak across Europe for the last few months, though Germany managed a stable release yesterday. Let’s see what the Euro-zone can do.
Speeches feature heavily today, with ECB’s Coeure and Bundesbank’s Weidmann on the calendar, along with Jerome Powell’s second day of testimony, where he’s expected to say the same as yesterday, though possibly in a slightly different way.
Durable goods orders and factory orders for January give us a picture of the manufacturing sector, while pending home sales for last month are also scheduled. Recall yesterday that housing starts fell 11.2% in January, the weakest since May last year.
The full MarketPulse data calendar is available for viewing at https://www.marketpulse.com/economic-events/ 
Senior Market Analyst’s Craig Erlam discusses this week’s key FX market events, including an update on Brexit, and previews the economic calendar.
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