Australian Dollar
Investors fled from risky assets yesterday. Markets continued to react to the recent withdrawal from Congress of Donald Trump’s bill aimed at replacing the Affordable Care Act (ACA). With Trump unable to pass the new legislation, despite his party holding a majority in both the lower and upper houses, has raised the possibility of his tax reforms and fiscal spending measures being blocked. Markets retreated to other safe havens, leaving little demand for the risky Australian Dollar, which slumped virtually across the board.
Today’s economic calendar includes a speech from Reserve Bank of Australia (RBA) member Guy Debelle and the latest ANZ Roy Morgan weekly consumer confidence index. Markets may still be too focussed on the volatility surrounding the US Dollar to pay much attention, however.
Sterling
The Pound was once again fulfilling its role as a somewhat unusual choice of safe haven and so AUD/GBP tumbled over -1% during yesterday’s session. With Brexit largely priced-in to Sterling, there are smaller chances of something bad slashing the Pound’s value – unlike the US Dollar, which has four months’ worth of appreciation on stimulus hopes to potentially unwind. As a result, investors were flocking into the Pound, causing it to soar against the majors. Sterling gained 0.8% against the New Zealand Dollar, 1% against the Canadian Dollar and 1.1% against the US Dollar.
There is no UK data set for release today but, with the triggering of Article 50 no more than a day away, AUD/GBP may be able to recover some of yesterday’s losses as investors sell Sterling ahead of the Brexit process.
Euro
The Euro was on mixed form yesterday, pushing AUD/EUR down to a ten-and-a-half-week low but softening against other safe assets, such as the Pound. As well as benefitting from the US Dollar rout, the common currency was also supported by solid German business confidence figures. The latest survey results from Ifo found that sentiment was at a six-year high, with the overall business climate index rising from 111.1 to 112.3. Additionally, European Central Bank (ECB) executive board member Sabine Lautenschläger claimed markets should be ready for a ‘change’ in policy from the bank. This has been interpreted as a hint that the ECB may soon start tapering its quantitative easing programme; something markets have been speculating on for some time now.
Speeches from ECB executive board member Benoit Coeure could support the Euro higher if they offer any suggestions on the outlook of monetary policy.
US Dollar
Investors were fleeing from the US Dollar yesterday, worried that they had been overconfident in pricing-in fiscal stimulus measures from President Trump. Without additional economic stimulus, the Federal Reserve may not see the need to accelerate the pace of monetary policy normalisation. The US Dollar may therefore be overvalued and the potential for the markets to correct lower has spooked many investors into selling out of the ‘Greenback’.
The US advance goods trade balance is released this evening, but markets are likely to look past it to Fed Chair Janet Yellen’s speech early on Wednesday morning.
Canadian Dollar
Like the other major currencies, the Canadian Dollar was rocked by the risk-off atmosphere created as investors withdrew from the US Dollar. There was no domestic data to provide support and the Canadian Dollar found no aid from the crude oil markets, where WTI and Brent were dropping over -1.5% each despite the tumbling US Dollar.
Bank of Canada Governor Stephen Poloz is due to give a speech, followed by a press conference, very early on Wednesday morning.
New Zealand Dollar
There was no domestic data released yesterday from New Zealand, leaving the New Zealand Dollar at the mercy of market sentiment. The high-risk ‘Kiwi’ was therefore ignored or being sold off.
There is no New Zealand data set for release until Friday, so the New Zealand Dollar will remain rudderless, reacting to market sentiment, during the coming few trade sessions.
Data Released
March 28th 09.30 AUD ANZ Roy Morgan Weekly Consumer Confidence Index (MAR 26)
March 29th 02.10 CAD Bank of Canada Governor Stephen Poloz Press Conference
March 29th 03.50 USD Fed Chair Janet Yellen Speaks