Australian Dollar
Several factors led to the Australian Dollar registering an over 0.8% decline against both the US Dollar and Euro on Tuesday. Firstly, the Reserve Bank of Australia’s (RBA) policy meeting minutes chose to focus on the headwinds facing the South Pacific nation as a result of issues in China and Japan. The minutes also indicated that policymakers, while optimistic about Australia’s growth outlook, are prepared to cut interest rates again later in the year.
The ‘Aussie’ also came under pressure as sliding commodity prices bolstered the appeal of safe-haven assets. While oil prices dropped below US$40 per barrel, iron ore values edged lower for a fifth consecutive session.
Speculation surrounding this week’s Federal Open Market Committee (FOMC) policy decision is also keeping investors wary and sapping risk-appetite. Any hints from the Fed that borrowing costs are likely to be raised over the next couple of months would have the potential to send AUD/USD careening away from its recent eight-month high.
Today’s Westpac Leading Index could lend the ‘Aussie’ support if it improves on the -0.04% figure recorded in January.
Sterling
A dearth of UK ecostats left the Pound battling against negative sentiment without support during Tuesday’s European session.
The British currency fell almost across the board after a report published by Bloomberg asserted that economists see a 23% chance of UK interest rates being cut this year – a considerable increase on the 10% odds presented only a couple of months ago.
While GBP dropped by over 0.8% against both USD and EUR, it managed to hold to the day’s opening levels of 1.9880 against a struggling ‘Aussie’.
Whether or not the Pound manages to firm today largely depends on how the UK’s latest employment numbers print. A sturdy increase in unemployment or, more crucially, an uptick in average earnings, would give Sterling a boost ahead of this week’s Bank of England (BoE) policy decision. That being said, if Chancellor George Osborne’s latest budget announcement details a raft of spending cuts any Pound gains could prove fleeting.
Euro
This week’s upbeat ecostats for the Eurozone (in the form of Monday’s Industrial Production data and Tuesday’s improved annual employment figure) have seen the common currency edge higher against a number of its rivals.
The Euro experienced extensive volatility last week as the European Central Bank (ECB) unleashed a wave of aggressive stimulus measures in hopes of staving off deflationary pressures and improving the Eurozone’s growth prospects. However, the common currency has been clawing back ground this week and may continue to do so if upcoming ecostats for the currency bloc, including the Eurozone’s Construction Output figures and tomorrow’s Consumer Price estimate, print well.
US Dollar
US consumer spending may be struggling but heightened demand for safe-haven assets helped the US Dollar shrug off the impact of negative domestic data and trend higher against several of its peers on Tuesday.
The ‘Greenback’ kept the Australian Dollar at bay even as US Advance Retail Sales came in at -0.1% in February, month-on-month. While that was an improvement on the -0.2% estimate, January’s result was negatively revised to -0.4%. The US Empire Manufacturing gauge was more encouraging, having improved from -16.64 to 0.62 but USD movement remained limited ahead of today’s more influential US inflation data.
As falling inflation could push the FOMC into adopting a dovish tone at their upcoming policy gathering, annual non-core CPI of 0.9% or lower might allow the Australian Dollar to bounce back against its US counterpart.
Canadian Dollar
With both the Canadian and Australian Dollars feeling the strain in the face of falling commodity prices, the AUD/CAD exchange rate spent Tuesday trading in a narrow range, with the pairing fluctuating around the 0.9950/1.0000 level.
Canada’s only domestic report, Existing Home Sales, failed to have much impact on ‘Loonie’ trading despite detailing a 0.8% increase in February, up from January’s month-on-month result of 0.5%.
While oil prices are likely to remain the main driver of AUD/CAD exchange rate movement over the days ahead, Canadian reports with the potential to impact ‘Loonie’ trading include Manufacturing Shipments and Wholesale Sales data for January. The nation’s Consumer Price Index will be in focus before the weekend.
New Zealand Dollar
Concerns that the price of dairy produce, New Zealand’s key commodity, may continue sliding have prevented the New Zealand Dollar from rebounding following last week’s surprising interest rate decision from the Reserve Bank of New Zealand (RBNZ). The ‘Kiwi’ extended declines against the Euro, Chinese Yuan, Pound, US Dollar and Australian Dollar after the latest Global Dairy Trade auction confirmed a 2% drop in dairy prices.
New Zealand’s upcoming current account number could help the ‘Kiwi’ recover losses if it shows the narrowing in the deficit forecast by economists.
Data Released
March 16th 08:45 NZD Current Account Balance (4Q)
March 16th 10:30 AUD Westpac Leading Index (MoM) (FEB)
March 16th 20:30 GBP Average Weekly Earnings (3M/YoY) (JAN) 2.0%
March 16th 20:30 GBP Employment Change (3M/3M) (JAN) 144k
March 16th 21:00 EUR Eurozone Construction Output s.a. (MoM) (JAN)
March 16th 23:30 GBP Osborne Makes Budget Speech to Parliament
March 16th 23:30 USD Building Permits (MoM) (FEB) -0.2%
March 16th 23:30 USD Consumer Price Index (YoY) (FEB) 0.9%