Australian Dollar
In spite of a lack of fresh domestic data the ‘Aussie’ started the week on a stronger footing, benefitting from a general mood of risk appetite. Confidence in the antipodean currency has strengthened in anticipation of the Reserve Bank of Australia’s (RBA) March meeting minutes. Expectations are increasingly turning away from the prospect of the central bank cutting interest rates again, with economists largely anticipating a year of neutral policy bias. This has helped limit the downside potential of the Australian Dollar, despite last week’s disappointing employment data.
Also in focus today will be the fourth quarter house price index, which could boost the ‘Aussie’ if it offers another indication of a robust housing market.
Sterling
Confidence in the Pound fell sharply in the wake of the news that Theresa May will trigger Article 50 on March 29th. This prompted a fresh resurgence in Brexit-based jitters, particularly as tensions with Scotland remain heightened. Markets are still concerned that the UK is heading towards a hard exit from the EU, with the two-year negotiating period expected to be fraught and contentious. With a sense of uncertainty persisting there was little reason for investors to favour Sterling overnight.
Further volatility is expected for the Pound in response to February’s UK inflation data, with a strong showing here set to boost hopes that the Bank of England (BoE) will adopt a more hawkish outlook.
Euro
Although German producer prices fell short of forecasts in February, this was not enough to particularly weigh on the single currency. The Euro continued to benefit from reduced worries over the prospect of a populist domino effect, with the far-right having lost out in the Dutch election. There was also a sense of optimism ahead of the latest Eurogroup meeting, with investors hopeful that some manner of progress might be made over Greece. While the bailout review was not signed off, the Euro strengthened on speculation that an end could be in sight for this particular saga.
In the absence of fresh domestic data the Euro is likely to be moved by developments in the US Dollar and wider market trends.
US Dollar
Appetite for the ‘Greenback’ remained muted on Monday, with the disappointment over the Federal Reserve’s less hawkish policy guidance still dragging on sentiment. Even though US data continued pointing towards economic robustness, USD exchange rates remained on the back foot. However, with a number of key Fed policymakers set to speak over the course of the week the US Dollar could recover imminently. Domestic political developments have also hampered the ‘Greenback’, with markets jittery over wiretapping accusations being levelled by the new administration.
If tonight’s fourth quarter current account balance figure shows a widening of the deficit this could boost the AUD USD exchange rate.
Canadian Dollar
Worries over oil continued weighing on the ‘Loonie’ as US production was found to have risen further. As the OPEC deal to limit output also appears to be in some jeopardy, the price of the commodity looks set to extend its slump. This kept the Canadian Dollar on a downtrend throughout Monday’s European session, even though Canadian wholesale sales strongly bettered expectations. The 3.3% jump in sales suggests that the domestic economy remains in a solid state despite the Canadian Dollar being so tied to oil market developments.
A strong showing from January’s retail sales figure could still offer CAD a rallying point though.
New Zealand Dollar
While New Zealand’s services PMI was found to have weakened somewhat in February, the sector continued demonstrating strong growth. As the index clocked in at a solid 58.8 the mood towards the New Zealand Dollar remained bullish. This sign of robustness within the New Zealand economy boosted expectations that the Reserve Bank of New Zealand (RBNZ) will maintain a neutral bias at its meeting on Thursday.
This morning’s credit card spending figures could extend the gains of the ‘Kiwi’ further, with higher spending pointing towards greater levels of consumer confidence.
Data Released
March 21st 11:30 AUD RBA Meeting Minutes
March 21st 13:00 NZD Credit Card Spending (YoY) (FEB)
March 21st 20:30 GBP Consumer Price Index (YoY) (FEB) 2.1%
March 21st 23:30 CAD Retail Sales (MoM) (JAN) 1.3%
March 21st 23:30 USD Current Account Balance (4Q) -128.2 billion