Australian Dollar
The Westpac leading index did not offer any particular support to the ‘Aussie’, falling -0.1% on the month in February. This weaker showing suggests that the domestic economy is losing some momentum, even as the housing market continues to heat up. Even so, with risk appetite generally rising in response to US Dollar softness the losses of the Australian Dollar were somewhat limited. However, demand for the antipodean currency remained fragile thanks to worries over US protectionism and political developments.
In the absence of fresh domestic data the ‘Aussie’ could struggle to find particular support today.
Sterling
Some of the Pound’s steam wore off overnight, with market enthusiasm over the strong UK inflation data fading. The prospect of a Bank of England (BoE) interest rate hike remains faint in spite of the bullish showing, limiting the upside potential of Sterling. Confidence was not encouraged by the news that the Markit household finance index had fallen to its lowest level since November 2013. With consumer spending expected to falter further over the coming months, the prospects for the UK economy do not appear overly positive at present.
Despite this, expectations are positive for February’s retail sales data, which could offer the Pound a temporary rallying point.
Euro
Confidence in the single currency was knocked back by a disappointing Eurozone current account report. The current account surplus was found to have narrowed further than forecast at the start of the year, falling from 46.9 billion to 2.5 billion on a non-seasonally adjusted basis. This highlighted the continued weakness of Eurozone exports, suggesting that the currency union remains in a less positive position. Although the odds continued to favour centrist candidate Emmanuel Macron in the French presidential election, this offered little fresh support to the Euro.
If German consumer confidence holds steady on the month, however, the single currency may be encouraged to trend higher.
US Dollar
Commentary from Federal Reserve policymakers continued limiting the appeal of the ‘Greenback’. Signs still point towards the central bank taking a more gradual approach to monetary tightening, encouraging investors to maintain bets for just two more interest rate hikes over the course of the year. Demand for the US Dollar weakened further in response to February’s existing home sales data, which showed a -3.7% contraction on the month. A cooling housing market could point towards softer consumer confidence, which would not be positive for the health of the overall economy.
While Fed Chair Janet Yellen is scheduled to speak this evening, the impact on USD exchange rates could be limited as the policymaker will not be specifically offering policy guidance.
Canadian Dollar
A larger-than-expected increase in US crude oil inventories saw Brent crude fall back below the key US$50 per barrel mark. This left the Canadian Dollar on a weaker footing, even as talk of OPEC extending its production cuts continued. If the cartel does agree to limit output further, this is still unlikely to cure the global oversupply glut with the US expected to keep expanding production. Altogether this does not bode well for the commodity-correlated ‘Loonie’.
Ahead of Friday’s inflation data the appeal of the Canadian Dollar is unlikely to improve.
New Zealand Dollar
Demand for the ‘Kiwi’ picked up on Wednesday, with the currency benefitting from a fresh uptick in the GlobalDairyTrade price index. With dairy prices beginning to recover from the sharp contraction seen earlier in the month, confidence in the sector improved. Although the outlook for the wider economy remains mixed the antipodean currency was still able to make gains ahead of today’s Reserve Bank of New Zealand (RBNZ) policy meeting.
Policymakers are expected to leave interest rates unchanged this morning, which could support the New Zealand Dollar if the tone of the meeting proves to be less dovish on the whole.
Data Released
March 23rd 07:00 NZD Reserve Bank of New Zealand Rate Decision 1.75%
March 23rd 18:00 EUR German GfK Consumer Confidence Survey (APR) 10
March 23rd 20:30 GBP Retail Sales (YoY) (FEB) 1.5%
March 23rd 23:00 USD Fed’s Yellen Speaks at Community Development Conference