Australian Dollar
After surging to an eight-month high against the US Dollar in the wake of the Federal Open Market Committee’s (FOMC) slightly dovish interest rate announcement and accompanying policy statement, the ‘Aussie’ shed some of its gains before the weekend.
The Australian Dollar also edged lower against the Pound and Euro despite comparatively firm iron ore prices and a disappointing University of Michigan Confidence Index for the US. The AUD/USD exchange rate held above the 0.76 level however and could extend gains this week if upcoming US ecostats lend justification to the Fed’s decision to negatively revise its interest rate hike projections.
With the Australian economic calendar looking particularly sparse, AUD volatility may be limited this week. That being said, any fluctuations in commodity prices (like a back peddling in iron ore) or swings in market sentiment are liable to have an impact on the South Pacific currency.
Sterling
Despite spending much of last week on a downtrend, the Pound was able to firm thanks to the Bank of England’s (BoE) fairly neutral interest rate announcement. As some analysts had feared that global and domestic headwinds would drive policymakers into pushing for a rate cut, the 9-0 vote to leave borrowing costs on hold kept the AUD/GBP exchange rate under pressure on Thursday and Friday.
The main cause of AUD/GBP volatility this week is likely to be the UK’s Consumer Price Index (CPI) for February. An uptick in inflation would be Pound-positive.
Euro
At the close of last week the Euro came under pressure against some of its peers as European Central Bank (ECB) President Mario Draghi went back on previous statements by insinuating that further rate cuts could be on the cards.
In an interview with an Italian newspaper Draghi was quoted as saying; ‘If new negative shocks should worsen the outlook, or if financing conditions should not adjust in the direction and to the extent that is necessary to boost the economy and inflation, a rate reduction remains in our armoury. We have not reached the physical lower bound [on rates].’
However, while the Euro dipped against the Pound and US Dollar, it managed to retain the upper hand against a broadly softening ‘Aussie’. Tuesday’s German IFO Business Climate and ZEW Economic Sentiment surveys could trigger AUD/EUR gains if they show sentiment is waning.
US Dollar
After tumbling in the wake of the FOMC’s March interest rate announcement, the US Dollar staged something of a rebound before markets closed for the weekend.
If this week’s US reports support the case in favour of the Fed leaving rates on hold for much of 2016 the AUD/USD exchange rate has the potential to hit new multi-month highs.
However, better-than-forecast US ecostats may bring the ‘Aussie’s bullish run against the ‘Greenback’ to an end. Of the US reports scheduled for publication this week the ones to watch out for include Existing Home Sales, New Home Sales, Durable Goods Orders, Markit Manufacturing PMI and Q4 GDP. Durable Goods Orders are forecast to have fallen by -2.5% in February – a result which would weigh on USD demand.
Canadian Dollar
Last week’s Canadian retail sales data smashed forecasts, but the nation’s consumer price index was less impressive, revealing a deeper decline in inflation than economists were expecting.
The data might have been mixed but with oil prices breaching $41 a barrel, ‘Loonie’ losses were limited and the AUD/CAD exchange rate dropped -0.4% before the weekend.
A notable lack of Canadian reports are likely to limit CAD volatility in the days ahead.
New Zealand Dollar
The New Zealand Dollar shed some of the gains accrued as a result of better-than-forecast domestic growth data as New Zealand’s Consumer Confidence Index dipped from 119.7 to 118.0 in March. The AUD/NZD exchange rate ended the week trading flatly but with a plethora of NZ data ahead (including the latest trade figures) the New Zealand Dollar has the potential to break away from its Australian cousin.
Data Released
March 21st 08:00 NZD Westpac NZ Consumer Confidence (1Q)
March 21st 13:00 NZD Credit Card Spending (YoY) (FEB)
March 22nd 01:00 USD Existing Home Sales (MoM) (FEB)
March 22nd 11:30 AUD House Price Index (YoY) (4Q)
March 22nd 20:00 EUR German IFO – Current Assessment (MAR)
March 22nd 20:30 GBP Consumer Price Index (YoY) (FEB)
March 22nd 21:00 EUR Eurozone ZEW Survey (Economic Sentiment) (MAR)