Australian Dollar
Yesterday saw the Australian Dollar ignoring some disappointing data and trending bullishly against the major currencies thanks to a significant jump in commodity prices.
The Westpac Consumer Confidence Index for March saw a -2.2% drop after the previous month’s rise of 4.2%, with the index falling from 101.3 to 99.1. A drop below 100 shows that more consumers are pessimistic than optimistic.
In other disappointing news, the Home Loans figures for January showed a -3.9% drop, a fall of nearly -1% more than was forecast.
However, suggestions from the Chinese manufacturing sector that steps might be taken to boost production saw the price of iron ore shoot up on Wednesday. Australia’s key export rose 19%, breaking above US$60 per dry metric tonne, a level at which mining companies can make a strong profit, according to one market analyst.
AUD/EUR rose to a three-and-a-half-month high, AUD/USD to a nine-month high and AUD/GBP to a yearly high.
Sterling
Strong data from the UK’s industrial sector helped Pound Sterling appreciate on Wednesday. Industrial Production rose 0.3% on the month and 0.2% on the year after contracting last month. Manufacturing production showed a 0.7% monthly rise, while the rate of sector decline slowed from -1.7% to -0.1%, above forecast.
However, the ‘Brexit’ referendum continued to be a weakening factor after the Queen was dragged into the row. The Sun newspaper published a story claiming she had partaken in an anti-European Union rant toward then-Deputy Prime Minister Nick Clegg during a dinner four years ago.
Clegg and Buckingham Palace both denied that such a conversation took place. Buckingham Palace wrote to the head of the Independent Press Standards Organisation (Ipso), claiming that the article headline, ‘Queen Backs Brexit’, violated the editors’ code of practice.
Euro
The Euro remained weak yesterday as investors feared more stimulus would come from today’s policy meeting of the European Central Bank (ECB). It is expected that President Mario Draghi will announce an extension of quantitative easing or a cut to the negative deposit rate, or potentially both.
Investors are particularly worried by the prospect of additional quantitative easing, as uncertainty builds over whether the policy is effective or not. Draghi has defended the asset purchasing programme, but with QE now a year old, many argue that the Eurozone economy should have displayed stronger signs of recovery by now.
US Dollar
A rise in commodity prices increased demand for high-risk assets yesterday and as such the US Dollar was putting on a soft performance. With little data released during the day, other than figures showing a 0.2% rise in mortgage applications and a lack of domestic news, the ‘Greenback’ saw little positive movement.
US Dollar exchange rates were further weakened after the International Monetary Fund (IMF) warned that the global economy was at ‘risk of economic derailment’. This has softened hopes of an interest rate hike in the near future from the Federal Reserve. US interest rate hikes often impact markets across the world, so concern about unbalancing an already weakened global economy could sway the Fed towards more cautious monetary policy.
Canadian Dollar
Brent crude oil remained at about US$40 per barrel yesterday, helping to strengthen the Canadian Dollar ahead of this morning’s interest rate decision by the Bank of Canada (BoC). The impending announcement weakened sentiment towards the ‘Loonie’, with investors waiting to see how the bank would act ahead of the first Federal Budget from the Liberal government.
As predicted, the BOC left interest rates on hold at 0.50%, although some economists are predicting that it could be forced to cut again in 2016.
New Zealand Dollar
The commodity price rally helped the New Zealand Dollar register bullish gains verses the major currencies, although it remained weak against the stronger Australian Dollar. The rise in prices managed to overshadow the news that the world’s largest dairy exporter, Fonterra, had cut their price forecast again. Confidence that the Reserve Bank of New Zealand (RBNZ) wouldn’t change interest rates during today’s policy meeting also helped keep the ‘Kiwi’ firm.
Data Released
March 10th 07.30 NZD Reserve Bank of New Zealand Rate Decision 2.50%
March 10th 07.30 NZD RBNZ Governor Wheeler News Conference on OCR
March 10th 11:00 AUD Consumer Inflation Expectation (MAR)
March 10th 11:01 GBP RICS House Price Balance (FEB) 50%
March 10th 23.45 EUR European Central Bank Rate Decision 0.05%
March 10th 23.45 EUR ECB Deposit Facility Rate -0.4%