Australian Dollar
The announcement of strong government action to help fuel the transition away from a mining-focussed economy helped to increase sentiment toward the Australian Dollar yesterday. Western Australia, a key region of the country in terms of economic activity, is being allocated an additional A$490 million for infrastructure to help speed up and strengthen the move away from mining. This boosted the ‘Aussie’ against most of the major currencies yesterday.
Today’s weekly consumer confidence survey and the NAB Business Conditions and Confidence indexes for March have the potential to strengthen or weaken the Australian Dollar.
Sterling
Pound Sterling ignored the weakening effect of a new survey yesterday that suggested the UK’s economy had slowed in the first quarter of 2016. The British Chambers of Commerce’s (BCC) Quarterly Economic Survey showed that the majority of growth indicators had weakened in the last quarter.
However, an initially bearish Pound was able to rise on correctional trading and the latest promising political developments. David Cameron announced the formation of a new tax avoidance taskforce, while a deal was reached with Tata Steel and investment firm Greybull Capital regarding the sale of the former’s Long Products Europe business.
The Pound was trading bullishly against virtually all the majors, although the ‘Aussie’s strength compressed gains. Today’s UK Consumer Price Index will likely dominate the Pound’s movement.
Euro
Expectations of more monetary stimulus from the European Central Bank (ECB) once again weighed on the Euro yesterday. Early gains were quickly erased after a marked slowing in Italian industrial production, which dropped from 3.8% to 1.2% on the year and declined -0.6% on the month in February.
With little other data available, investors were left to ponder the likelihood of increased policy loosening from the ECB. Investors are concerned both that the ECB may increase stimulus and that the Governing Council has reached the limit of its powers.
Today’s Final German Consumer Price Index for March could solidify attitudes towards the likelihood of more stimulus. A positive printing could strengthen the Euro, while a negative printing will weaken the common currency further.
US Dollar
The US Dollar was firmly in bear mode yesterday, with a new forecast by the Organisation for Economic Co-operation and Development (OECD) suggesting that growth in the US will continue to deteriorate. The US Composite Leading Indicator marginally declined to 98.9, with a score of 100 representing average economic activity. A wider measure of economic activity, for the countries that make up the OECD as a whole, slipped from 99.7 to 99.6.
A worse-than-expected performance from Chinese inflation figures further weakened sentiment. With Federal Reserve Chair Janet Yellen having indicated that global conditions would guide the Fed in making monetary policy decisions, investor hopes of an imminent rate hike softened. As a result, the Australian Dollar was able to trend bullishly.
A meeting between Janet Yellen and Barrack Obama to discuss the US economy could continue to drive sentiment throughout the session.
Canadian Dollar
The Canadian Dollar put on a mixed performance yesterday, making decent gains against the Euro and the US Dollar but slipping into negative territory verses the Australian Dollar. Several economists and analysts commented that they believed the uptick in the Canadian economy would prove to be temporary, undermining the strengthening effect of last week’s positive data.
Speculation that the Bank of Canada (BOC) may have to cut interest rates again at least once in the next two years also weighed on ‘Loonie’ sentiment.
There is no Canadian data due for release today, so speculation ahead of the upcoming meeting to decide whether or not oil producers should freeze production could drive sentiment.
New Zealand Dollar
US Dollar weakness helped the New Zealand Dollar to make a bullish rise yesterday, although gains against the also-advancing Australian Dollar were more muted. There was little supportive data for the ‘Kiwi’.
Investor hopes were raised by comments from New Zealand Prime Minister John Key, who stated that he intended to question Chinese officials over a notion that Australia had a better deal on dairy produce than New Zealand. A clause in the free trade agreement with China protects New Zealand investors, so hope that New Zealand could secure a better arrangement regarding its chief export boosted investor hopes and therefore the ‘Kiwi’.
Data Released
April 12th 05.00 USD Fed’s Yellen Meets with US President Obama
April 12th 11.30 AUD NAB Business Confidence (MAR)
April 12th 16.00 EUR German Consumer Price Index (YoY) (MAR F) 0.3%
April 12th 18.30 GBP Consumer Price Index (YoY) (MAR) 0.4%
April 12th 18.30 GBP Core Consumer Price Index (YoY) (MAR) 1.3%