Australian Dollar
Despite the fact that the tragic events in Brussels caused market sentiment to dampen considerably, the retreat from high-yielding assets was not enough to offset Australian Dollar gains. This was partly in response to comments from Reserve Bank of Australia (RBA) Governor Glenn Stevens that the domestic economy is in good shape. Tuesday’s domestic data also supported ‘Aussie’ (AUD) appreciation after the fourth-quarter House Price Index bettered both the annual and quarterly estimates.
Wednesday saw the Australian Dollar cool from highs on Tuesday as safe-haven demand took grip of the markets. Additionally, the solitary Australian data publication, February’s Skilled Vacancies, saw a monthly contraction of -0.9%. US Dollar strength also provided ‘Aussie’ headwinds.
With a complete absence of domestic data today, the Australian Dollar is likely to continue to trend in response to market sentiment. China’s Swift Global Payments data is unlikely to be hugely impactful. The Reserve Bank of Australia will welcome further AUD depreciation given concerns regarding overvaluation.
One data publication that may cause AUD volatility today is the US Durable Goods Orders report due for publication during the North American session. If the US Dollar declines in response to the data the Australian Dollar may find support overnight.
Sterling
The hardest-hit currency in the aftermath of the Brussels terrorist attacks was the British Pound. This was mainly due to the fact that pro-‘Brexit’ campaigners will use the tragic events as an example of why Britain is safer outside of the European Union.
During the European session, the British Pound extended losses thanks to ongoing political uncertainty. Mayor of London Boris Johnson gave evidence regarding his pro-‘Brexit’ stance and the benefits the UK would gain from leaving the EU. Johnson dismissed the idea that the UK would be worse-off economically and played down the intensity of London financiers’ wishes for Britain to remain a member of the EU.
The Pound is likely to see volatility tonight with the publication of retail sales and housing data.
Euro
The Euro has also been negatively affected by the events in Brussels, although not to the extent of the Pound Sterling. US Dollar strength also played a hand in the Euro’s depreciation.
Recently, European Central Bank (ECB) President Mario Draghi hinted that the central bank is unlikely to expand asset purchases further or cut the overnight cash rate. However, with inflation showing little sign of recovering speedily, many analysts forecast the use of other, less conventional tools.
‘Helicopter money’ has become a buzz phrase of late. The idea is that a government sells short-dated debt directly to their central bank, and the money is used to fund massive tax reductions or spending programs. Whilst few economists expect the ECB to adopt helicopter money any time soon, the Frankfurt-based central bank is likely to be the first major central bank to do so.
US Dollar
With risk sentiment damp after the Brussels attacks roiled markets, the US Dollar strengthened considerably thanks to its safe-haven status. Even yesterday’s slower-than-forecast manufacturing output in March wasn’t enough to prevent USD appreciation.
Early this morning, slower-than-expected New Home Sales in February also failed to offset USD gains, with the AUD/USD conversion rate dropping by around -1.0% during the North American session.
Later this evening, US Durable Goods Orders data should cause overnight AUD/USD volatility. If the data matches forecasts of -2.5%, the US Dollar may cool from today’s highs. This would
likely be ‘Aussie’ supportive.
The US Dollar may also decline during the Australasian session given that the recent appreciation will open up some attractive trader selling positions.
Canadian Dollar
With crude oil prices dropping towards $40 a barrel, the Canadian Dollar declined versus nearly all of its major peers overnight. Oil prices plunged after data out of the US showed inventories gained far more than had been predicted.
The ‘Loonie’ (CAD) did see some early gains after the latest Federal Budget showed increased spending in Canadian infrastructure, but the report also caused concern that the government deficit will greatly exceed initial expectations.
New Zealand Dollar
The New Zealand Dollar also declined overnight in response to dampened market sentiment and US Dollar strength. A report from Fonterra that the dairy giant raised dividends to aid farmers did little to push the ‘Kiwi’ (NZD) higher.
There is likely to be ‘Kiwi’ volatility this morning, however, with New Zealand’s trade balance data due for publication. Although the Oceanic nation is looking to move away from a trade-based economy, the data will nonetheless be significant.
Data Released
March 24th 23:30 USD Durable Goods Orders (FEB P)