Australian Dollar
A strong US Dollar kept the Australian Dollar weak yesterday, with all eyes on the result of the Federal Reserve meeting and the accompanying policy statement. Investors were expecting a strong outlook on the economy from the Federal Open Market Committee (FOMC) and this confidence kept the US Dollar bullish.
An important indicator of Australian economic expansion showed that the outlook for the remainder of 2016 is for below-trend growth. The Westpac-MI Leading Index rose from -0.99% to -0.82%, but the negative number shows that Australian GDP is expected to slow to below the ‘trend’ level of 2.75%.
Key employment figures today could help the Australian Dollar to recover from yesterday’s weakness. The Employment Rate is expected to remain at 6%, while 12k new jobs are predicted to have been created in February, after the upwardly revised drop of -7.5k in February.
Sterling
UK Chancellor of the Exchequer George Osborne delivered his Budget speech to Parliament yesterday. Pound Sterling weakened in anticipation as investors awaited another round of harsh spending cuts. Osborne had previously claimed he was looking to raise an additional £4 billion and save 50 pence for every £100 spent by the UK government.
The actual Budget seemed to include several ‘giveaways’, including a freeze on fuel duty, the introduction of new lifetime savings ISAs for the under-40s and increased pension contribution demands from UK employers. However, the Budget also included significant cuts to growth forecasts for the next five years and weaker inflation predictions.
Euro
The Euro put on a mixed performance yesterday as the US Dollar strengthened. The advancing ‘Greenback’ weakened the Euro thanks to the inverse relationship between the currencies. However, the Federal Reserve was expected to make no changes to stimulus measures, meaning the Eurozone and the States wouldn’t see widening policy divergence in the short term.
Positive construction data helped to boost the common currency, with output in January advancing at a seasonally-adjusted rate of 3.6%, after the -0.7% fall in December. Year-on-year (YoY) Construction Output leapt up 6%.
Eurozone Consumer Price Index figures are due out later today and are expected to show deflation overall.
US Dollar
The markets anticipated a confident economic outlook from the Federal Reserve and this optimism kept the US Dollar strong yesterday.
Headline Consumer Price Index figures helped the US Dollar to increase its gains on the major currencies. YoY inflation for February fell, although not by as-much-as-predicted, sliding from 1.4% to 1%, while the core index saw growth accelerate unexpectedly, rising from 2.2% to 2.3%.
Labour market data is due at the end of the day and is expected to show that Initial Jobless Claims and Continuing Claims both crept up compared to the previous month’s figures.
Canadian Dollar
The Canadian Dollar was bullish yesterday as oil continued to recover from the previous two-day slide, trading around the key US$40 per barrel mark.
A marked increase in Canadian factory sales sparked hopes of stronger growth this year. Sales grew by 2.3% in January, outstripping forecasts of a 0.5% rise, meaning that sales were a record CA$53.13 billion, while December’s figures were revised up, making the final figure 1.4%.
Analysts quickly suggested that the figures may have been hinting at first quarter GDP growth in excess of the 1% forecast by the Bank of Canada earlier in the year.
New Zealand Dollar
Another drop in dairy prices yesterday kept the New Zealand Dollar on a mixed footing. The latest -2.9% slump in the GlobalDairyTrade Price Index marks the fifth time in six dairy auctions that prices have fallen. The drop was more than twice the previous month’s rise, which was the first time in 2016 prices had increased, taking the average price per metric tonne down to US$2,190.
Key Gross Domestic Product figures for the final quarter of 2015 are due out soon. Quarter-on-quarter (QoQ) GDP is expected to have slowed from 0.9% to 0.7%, while YoY growth is anticipated to have dipped from 2.3% to 2.1%.
Data Released
March 17th 08.45 NZD Gross Domestic Product (YoY) (4Q) 2.1%
March 17th 09.05 AUD RBA’s Debelle Speech in Sydney
March 17th 11:30 AUD Unemployment Rate (FEB) 6%
March 17th 11:30 AUD Employment Change (FEB) 12.0k
March 17th 21.00 EUR Eurozone Consumer Price Index (YoY) (FEB F) -0.2%
March 17th 21.00 EUR Eurozone Consumer Price Index – Core (YoY) (FEB F) 0.7%
March 17th 23.00 GBP Bank of England Rate Decision (MAR 17) 0.5%
March 17th 23.00 GBP Bank of England Asset Purchase Target (MAR) 375b