Australian Dollar
Ahead of the Reserve Bank of Australia’s (RBA) interest rate decision the Australian Dollar broadly strengthened. Demand for the South Pacific currency increased as the People’s Bank of China (PBoC) cut its reserve requirement ratio in order to increase liquidity.
The 50 basis point cut, which will come into effect on March 1st, gave the ‘Aussie’ a boost against the US Dollar, Pound and Euro. AUD/NZD was also able to recover from a 4-day low. The currency had previously come under pressure as a result of disappointing domestic Inventories and Company Operating Profit data.
If the RBA decides to respond to the recent market volatility by cutting interest rates we could see the ‘Aussie’ slump. Leaving fiscal policy on hold may cause the Australian Dollar to edge higher, but not if the central bank adopts a dovish tone and indicates that fiscal policy will be adjusted in the near future.
Other Australian news to be aware of includes the AiG Performance of Manufacturing Index for February, Current Account figures and Building Approvals numbers. China’s Manufacturing and Non-Manufacturing PMI will also be of interest.
Sterling
A new week of trading brought renewed UK ‘Brexit’ concerns and kept the Pound under pressure. A report published by UBS indicated that a ‘Leave’ vote could see Sterling plummeting against its rivals and potentially falling to parity with the Euro.
UBS stated; ‘In our view, the largest part of the weakness in Sterling since November can be attributed to increased concern over the possibility of exit from the EU.’
Monday’s UK data failed to offer the Pound much support, with the Lloyds Business Barometer falling from 45 to 28 and Mortgage Approvals coming in just above forecasts. The AUD/GBP exchange rate remained in the region of 0.51. While the RBA decision and Chinese PMIs are liable to be the main cause of Australian Dollar movement, the UK’s Markit Manufacturing PMI will also be of interest. If the rate of manufacturing output is shown to have slowed as expected, the Pound could record losses during the European session.
Euro
With the Eurozone’s latest inflation data upping the odds of the European Central Bank (ECB) rolling out additional stimulus at its March gathering, the AUD/EUR exchange rate firmed on Monday. The Eurozone’s final non-core consumer price index for February printed at -0.2% rather than the 0.0% anticipated while the core gauge came in at 0.7% instead of 0.9%.
Annual German retail sales also fell short of forecasts, with consumer spending dropping by -0.8% in January rather than increasing the 1.8% anticipated. The Australian Dollar accordingly strengthened by over 0.5% against the Euro to achieve a high of 0.6570.
The next Euro-centric reports to focus on include Markit’s final Manufacturing PMI for the Eurozone and its largest economies, German/Eurozone unemployment figures and Italian GDP.
US Dollar
Sub-par US data left the Australian Dollar enjoying the upper hand against the US Dollar. The AUD/USD pairing may not have returned to the 0.72 highs seen last week but the ‘Aussie’ did climb as the Chicago Purchasing Manager report, Pending Home Sales figures and Dallas Fed Manufacturing Activity Index all came in below forecast levels.
The Federal Reserve has stated that the next US interest rate hike will be data-dependent so high-profile US reports, like Wednesday’s US Manufacturing PMI, are likely to have a notable impact on US Dollar trading over the coming weeks and months. The ISM gauge is expected to show a moderate improvement from 48.2 to 48.5, but if the measure remains in contraction territory it’s unlikely to give the ‘Greenback’ much of a boost.
Canadian Dollar
Despite oil prices rising and Canadian Current Account, Industrial Product Price and Raw Materials Price reports improving on forecasts the Canadian Dollar edged lower against a broadly strengthening Australian Dollar on Monday.
Last week investors had little in the way of Canadian data to sink their teeth into but the economic calendar is looking much fuller over the next couple of days, with Wednesday seeing the release of Canada’s GDP for December and RBC Manufacturing PMI.
New Zealand Dollar
Less-than-impressive domestic data, in the form of a declining Business Confidence report for February and a dipping ANZ Activity Outlook figure, weighed on the New Zealand Dollar on Monday. The ‘Kiwi’ was also struggling as a result of general market risk aversion and the prospect of New Zealand’s latest dairy auction showing another decline in the value of New Zealand’s main commodity.
The New Zealand Dollar fell by over 0.7% against the Australian Dollar, Pound Sterling and Euro. New Zealand’s Terms of Trade Index could have an impact on NZD trading in the hours ahead.
Data Released
March 1st 09:30 AUD AiG Performance of Manufacturing Index
March 1st 11:30 AUD Current Account Balance (4Q) -A$20.0b
March 1st 11:30 AUD Building Approvals (JAN) (MoM)
March 1st 12:00 CNY Manufacturing/Non-Manufacturing PMI (FEB)
March 1st 14:30 AUD RBA Interest Rate Decision 2%
March 1st 20:00 EUR Eurozone Manufacturing PMI (FEB) 51
March 1st 20:30 UK Markit UK PMI Manufacturing (FEB) 52.3