Australian Dollar
Even though the latest Australian consumer confidence measure showed an improvement on the week, this was not enough to boost the ‘Aussie’. A general sense of risk aversion weighed heavily on the antipodean currency, with markets still cautious over the prospect of the US delivering on promised infrastructure investment. With commodity prices still under pressure, the appeal of the Australian Dollar remained limited, particularly as the damage from Cyclone Debbie is yet to be assessed.
Support for the ‘Aussie’ is likely to stay limited today in the absence of any fresh domestic data.
Sterling
Markets continued to favour the Pound overnight, with the impending activation of Article 50 failing to particularly weigh on sentiment. A sense of optimism was sparked by reports that the UK government may be backing away from its threat to walk away from Brexit negotiations without any deal. This increased hopes that an exit via the cliff edge might be avoided, even as domestic tensions mounted over the prospect of a second Scottish independence referendum.
Even so, Sterling is likely to come under at least some pressure as the formal start to the two-year exit process approaches.
Euro
In spite of the more hawkish outlook expressed by European Central Bank (ECB) policymakers, demand for the single currency remained muted. Markets continue to doubt the likelihood of the ECB tapering its quantitative easing program, limiting the upside potential of the Euro. Even with underlying data continuing to point towards a resilient Eurozone economy, investors have remained jittery. Although the polls still indicate that centrist Emmanuel Macron is likely to emerge as the next French president, worries over the populist right have not entirely faded.
Confidence in the common currency could pick up more substantially if February’s German import price index proves positive.
US Dollar
Better-than-expected US ecostats helped the ‘Greenback’ recover some of its earlier losses, even though investors are still doubtful over the abilities of the Trump administration. Regardless of the domestic political climate, the US economy continued demonstrating its robustness. A surge in consumer confidence and a sharp narrowing of the advance goods trade deficit both encouraged the US Dollar to trend higher. However, as the Federal Reserve looks likely to maintain a slower pace of monetary tightening the strength of the ‘Greenback’ was still limited.
If markets struggle to regain confidence in Trump’s ability to deliver on promised tax cuts and fiscal reforms, USD exchange rates may maintain a bearish outlook.
Canadian Dollar
Oil prices bounced higher in the wake of news that Libyan oil supplies faced fresh disruption. Coupled with speculation that OPEC could agree to extend its production cuts as far as the end of the year this gave investors fresh cause for confidence in the volatile commodity. This helped to shore up the Canadian Dollar even as general risk appetite weakened, although the global oversupply glut looks set to persist for the foreseeable future.
Another increase in US crude oil inventories could see the ‘Loonie’ rapidly reverse its gains, however.
New Zealand Dollar
Worries over the growth outlook of the US continued weighing on the ‘Kiwi’ on Tuesday. The risk-sensitive currency fell further out of favour in the absence of any supportive domestic developments. As a result the New Zealand Dollar trended lower across the board, losing out against even the bearish ‘Aussie’.
Wider market developments will continue dictating the movement of the ‘Kiwi’ today, making any particular recovery from its downtrend unlikely.
Data Released
March 29th 17:00 EUR German Import Price Index (YoY) (FEB)
7.0%
March 29th 19:30 GBP Net Consumer Credit (FEB) 1.3 billion
March 29th 19:30 GBP Mortgage Approvals (FEB) 69,500
March 30th 01:00 USD Pending Home Sales (YoY) (FEB)