Australian Dollar
February’s raft of Australian labour market data proved unexpectedly weak, with the unemployment rate jumping from 5.7% to 5.9%. Despite the measure’s reputation for volatility, this undermined confidence in the health of the domestic economy. As a result the ‘Aussie’ slumped sharply across the board, particularly as markets returned to a more risk averse mood. Even so, the result was not entirely disappointing as the general balance was found to have shifted back towards full-time employment.
With no fresh Australian data set for release ahead of the weekend, the ‘Aussie’ is unlikely to see any particular improvement during Friday’s session.
Sterling
While the Bank of England (BoE) left interest rates unchanged at its March meeting, as expected, the Pound surged across the board. Investors were encouraged to pile back into Sterling as a result of a surprise split within the Monetary Policy Committee (MPC), with hawk Kristin Forbes voting for a 25bpt rate hike. Even though the minutes remained generally dovish in tone, and Forbes is due to depart in June, this minor dissent helped Sterling recover from some of its recent Brexit-based softness.
Developments surrounding Scotland’s bid for a second independence referendum and wider political concerns are still expected to weigh on the Pound in the near term however.
Euro
There was a sigh of relief when the Dutch election results showed that far-right candidate Geert Wilders had failed to secure victory. Demand for the Euro picked up as worries over the future of the currency union temporarily eased, with the threat of populist upsets seeming somewhat diminished. Even so, the single currency struggled to hold onto its initial relief rally as focus turned back towards France. The finalised Eurozone consumer price index data for February offered little cause for confidence, underlining the likelihood that the European Central Bank (ECB) will not taper its quantitative easing program for some time to come.
If the Eurozone trade surplus is found to have narrowed at the start of the year this could see EUR exchange rates trend lower.
US Dollar
Even though investors were disappointed that the Federal Reserve did not take a more hawkish view on monetary policy, the US Dollar recovered its footing during Thursday’s European session. Although policymakers are likely to remain cautious when it comes to raising interest rates further the outlook of the US economy is still solid. With the labour market performing well and production picking up, underlying support for the ‘Greenback’ is expected to remain strong. However, thanks to some less encouraging housing market data USD exchange rates saw rather more mixed form overnight.
An uptick in the University of Michigan consumer confidence index would give the US Dollar additional support going into the weekend.
Canadian Dollar
Oil developments continued dominating the outlook of the ‘Loonie’, despite US stockpiles having shown a modest drawdown on the week. The appeal of the commodity-correlated Canadian Dollar was limited by signs that global oversupply worries may be far from over. With OPEC’s production cut agreement in question following Saudi Arabia’s increase in output oil prices look set to remain under pressure for the foreseeable future. Even with the Fed taking a marginally less hawkish outlook, markets saw little reason to favour the Canadian Dollar on Thursday.
January’s manufacturing sales figure is expected to show contraction on the month, further limiting confidence in the Canadian economy.
New Zealand Dollar
New Zealand’s fourth quarter gross domestic product report fell short of forecasts, with growth slowing from 0.8% to 0.4% on the quarter. This weakening in economic activity prompted the ‘Kiwi’ to weaken sharply, extending its losses thanks to resurgent demand for the US Dollar. Markets speculated that this slowdown could encourage the Reserve Bank of New Zealand (RBNZ) to adopt a more dovish view at its policy meeting next week. If policymakers did signal a willingness to ease policy this would diminish the appeal of the New Zealand Dollar further.
This morning’s New Zealand manufacturing PMI could offer the ‘Kiwi’ a rallying point, providing that the measure demonstrates continued expansion.
Data Released
March 17th 08:30 NZD Manufacturing PMI (FEB)
March 17th 11:00 NZD ANZ Consumer Confidence Index (MAR)
March 17th 21:00 EUR Eurozone Trade Balance (JAN) 22 billion
March 17th 23:30 CAD Manufacturing Sales (MoM) (JAN) -0.5%
March 18th 01:00 USD University of Michigan Confidence Index (MAR P) 97