Australian Dollar
Friday saw little in the way of domestic developments for the ‘Aussie’, leaving the commodity-correlated currency at the mercy of wider market trends. Risk appetite remained heighted ahead of the weekend, in spite of stronger-than-expected US data, thanks to the less hawkish outlook of the Federal Reserve. With US monetary policy likely to tighten at a slower pace investors saw little reason not to pile into the higher-yielding Australian Dollar.
While it will be a similarly quiet start to the week for the ‘Aussie’ some degree of volatility is expected in anticipation of the release of the Reserve Bank of Australia’s (RBA) meeting minutes on Tuesday.
Sterling
The Pound continued to benefit from the surprising split at the Bank of England’s (BoE) policy meeting, despite the high odds that the central bank will keep interest rates on hold for the foreseeable future. Tensions rose over the prospect of a second Scottish independence referendum, with Theresa May refusing to grant one prior to the end of the Brexit negotiation process. This did not particularly limit the appeal of Sterling, though, despite the indications that further political worries could be in store.
This morning’s Rightmove house price index could boost the Pound, providing that the domestic housing market continues to demonstrate resilience in the face of Brexit jitters.
Euro
Confidence in the single currency weakened sharply in response to January’s Eurozone trade balance figures. While markets had anticipated a significant narrowly of the surplus there was a shock when the currency union instead posted its first trade deficit since 2014. Coupled with a sharp contraction in construction output this suggested that the Eurozone remains under pressure. With focus turning back towards the French presidential election, where far-right candidate Marine Le Pen continues to enjoy some solid support, the appeal of the Euro was generally limited.
Worries over Greece, and the persistent delays to the conclusion of its latest bailout review, could keep the Euro on a weaker footing at the start of the week.
US Dollar
Domestic data continued to underline the strong state of the US economy, particularly as continuing jobless claims were found to have fallen further than forecast. The University of Michigan consumer confidence survey also proved encouraging, with its current conditions index rising to its highest level since November 2000. Even so, investor disappointment over the less hawkish nature of the Federal Reserve’s latest policy guidance continued to weigh on the US Dollar. With policymakers likely to remain more cautious in the face of continued elements of political uncertainty the upside potential of the ‘Greenback’ remained limited.
Comments from Chicago Fed President Charles Evans could provoke some volatility for USD exchange rates tonight, although there is unlikely to be any particular shift in policy expectations.
Canadian Dollar
The bearish outlook of the oil market kept the Canadian Dollar on a weaker footing ahead of the weekend. As signs from the US continue to point towards a prolonged global glut this does not bode overly well for the Canadian economy, in spite of its increasing shift away from the oil industry. These commodity worries overshadowed an unexpectedly positive manufacturing sales figure, which showed growth of 0.6% on the month as opposed to the -0.5% contraction that had been forecast.
A similarly resilient wholesale sales figure, however, could offer the ‘Loonie’ a rallying point overnight.
New Zealand Dollar
Although the ANZ consumer confidence index proved disappointing this was not enough to sour the mood towards the ‘Kiwi’ on Friday. Demand for the antipodean currency was instead buoyed by a sharp uptick in February’s manufacturing PMI, which rose from 52.2 to 55.2 as the sector continued to expand. This gave investors fresh cause for confidence in the outlook of the New Zealand economy, suggesting that the Reserve Bank of New Zealand (RBNZ) may not take an overly dovish view at its policy meeting this week.
If February’s service PMI proves similarly encouraging the New Zealand Dollar could extend its bullish run today.
Data Released
March 20th 08:30 NZD Services PMI (FEB)
March 20th 11:01 GBP Rightmove House Price Index (YoY) (MAR)
March 20th 23:30 CAD Wholesale Sales (MoM) (JAN)
March 21st 11:30 AUD RBA Meeting Minutes