Australian Dollar
Lacking anything in the way of supportive domestic data the ‘Aussie’ softened on Thursday. The appeal of the currency has remained muted in the wake of the more cautious note struck by the Reserve Bank of Australia (RBA) in its meeting minutes. Copper prices have come under pressure as market doubts over the Trump administration mount, with hopes of greater infrastructure investment waning. A relatively strong New Zealand Dollar has also limited demand for the ‘Aussie’.
Ahead of the weekend the Australian Dollar is likely to remain on a downtrend unless market risk appetite picks up.
Sterling
In another upside surprise UK retail sales were found to have leap 1.4% on the month in February, boosting the Pound. This solid increase in sales highlighted the continued confidence of consumers, in spite of persistent Brexit-based uncertainty and rising inflationary pressure. Although household finances are expected to come under greater pressure in the coming months, leading to a general decrease in spending, this positive showing nevertheless shored up Sterling in the short term.
This evening’s BBA loans for house purchase figure could offer the Pound another rallying point, providing that the housing market is shown to remain in robust health.
Euro
German consumer confidence was found to have fallen in the GfK survey for April, putting further downside pressure on the single currency. Weakening sentiment in the Eurozone’s powerhouse economy was not seen to bode well for the health of the wider currency union, particularly as exports have weakened. This helped to cement expectations that the European Central Bank (ECB) will not move to taper its quantitative easing program in the near future, suggesting that policy divergence with the Fed will increase.
Forecasts point towards a moderate slowing in March’s Eurozone PMI, which could diminish the appeal of the Euro further.
US Dollar
Although US new home sales strongly bettered expectations this was not enough to boost the appeal of the US Dollar overnight. With the Federal Reserve looking likely to maintain its more cautious view on monetary policy markets saw little reason to favour the lower-yielding ‘Greenback’. Political developments also weighed on USD exchange rates, with the Trump administration facing its first major test over the Republican healthcare bill. Defeat here could further undermine confidence in Trump’s ability to deliver on economic reforms, which have been a large part of the US Dollar’s underlying bullishness.
Any slowing in the durable goods orders figure could encourage further selling of the ‘Greenback’ tonight.
Canadian Dollar
Confidence in the ‘Loonie’ was not knocked by less-than-encouraging comments from Bank of Canada (BOC) deputy governor Lawrence Schembri. Noting that business investment remains sluggish, Schembri offered a relatively cautious assessment of the domestic economy. Even so, a general uptick in risk appetite helped to keep the Canadian Dollar on a stronger footing overnight. Oil prices also showed some limited improvement, with Brent crude climbing back above the psychologically important US$50 per barrel mark.
However, if the latest inflation figures show any softness this could prompt the ‘Loonie’ to trend lower across the board.
New Zealand Dollar
The Reserve Bank of New Zealand (RBNZ) maintained its neutral bias yesterday, encouraging investors to pile into the ‘Kiwi’. Although policymakers noted that recent positive data was likely due to ‘temporary factors’ the overall message remained cautiously optimistic. This added support to the view that the RBNZ will not loosen monetary policy again, particularly as the Fed adopts a slower pace of tightening.
If February’s trade balance shows a surplus this could see the New Zealand Dollar extending its gains heading into the weekend.
Data Released
March 24th 08:45 NZD Trade Balance (FEB) 160 million
March 24th 19:30 EUR German Manufacturing PMI (MAR P) 56.5
March 24th 19:30 EUR Germany Services PMI (MAR P) 54.5
March 24th 20:30 GBP BBA Loans for House Purchase 44,900
March 24th 23:30 CAD Consumer Price Index (YoY) (FEB) 2.1%
March 24th 23:30 USD Durable Goods Orders (FEB P) 1.2%