Australian Dollar
A modest uptick in the TD Securities inflation forecast failed to shore up the ‘Aussie’ on Monday, with the mood towards the antipodean currency fast souring. Investors were discouraged by an unexpected contraction in retail sales, which suggested that consumer confidence remains weaker. With the appeal of higher-risk currencies generally limited there was little particular reason to favour the Australian Dollar, particularly as the manufacturing PMI also slowed on the month.
However, if policymakers adopt a more positive outlook at the Reserve Bank of Australia’s (RBA) April policy meeting the ‘Aussie’ could find some renewed support today.
Sterling
The UK’s manufacturing sector was found to have faltered somewhat at the end of the first quarter, with March’s manufacturing PMI slipping from 54.5 to 54.2. Sterling slumped in response to this disappointing showing, with investors viewing the future of the domestic economy with less optimism. As Brexit-based uncertainty looks set to only worsen in the coming months this sign that the economy is already slowing weighed heavily on the Pound. Rising tensions over the fate of Gibraltar also dented demand for GBP at the start of the week.
Another weak showing from this evening’s UK construction PMI could increase the downside pressure on the Pound.
Euro
Confidence in the health of the Eurozone picked up after the latest raft of domestic manufacturing PMIs generally bettered forecasts. These were accompanied by a decline in the Eurozone unemployment rate, which fell to a near-eight-year low at 9.5%. Altogether this suggested that the currency union remains in a resilient state, boosting hopes that the European Central Bank (ECB) will begin to tighten monetary policy in the nearer future. The Euro strengthened as a result, even though the tone of ECB policymakers has remained largely neutral.
A rebound in retail sales for February could see the single currency extend its bullish run, with higher consumer spending offering further incentive to hawkish policymakers.
US Dollar
With safe-haven demand on the rise the US Dollar was encouraged to push higher against many of the majors on Monday. While doubts remain over the capabilities of the US administration the mood towards the ‘Greenback’ picked back up. Although the Markit manufacturing PMI proved weaker than expected and hit a six-month low USD exchange rates remained on a stronger footing. Hopes of fiscal stimulus measures and a more hawkish Federal Reserve continued to support demand for the US Dollar.
February’s trade balance is forecast to show a narrowing of the deficit, which could give further fuel to the bullish form of the ‘Greenback’.
Canadian Dollar
The ‘Loonie’ came under renewed pressure after Libya’s largest oil field resumed production, undermining the recent recovery in oil prices. Even though March’s manufacturing PMI bettered expectations, showing a solid uptick on the month this was not enough to boost the appeal of the Canadian Dollar. With the global oversupply glut looking unlikely to fade any time soon investors saw little reason to buy into the commodity-correlated ‘Loonie’.
If Brent crude prices remain on a downtrend this could keep the Canadian Dollar on the back foot in the near term.
New Zealand Dollar
An absence of fresh domestic data limited the appeal of the New Zealand Dollar at the start of the week. With risk appetite generally subdued the ‘Kiwi’ struggled to find any particular traction against rivals, although it did benefit somewhat from the weakness of the Australian Dollar.
Tomorrow’s GlobalDairyTrade auction could offer the New Zealand Dollar some encouragement, with higher prices likely to bode well for the health of the domestic dairy sector and the wider economy.
Data Released
April 4th 11:30 AUD Trade Balance (FEB) 1.7 billion
April 4th 14:30 AUD Reserve Bank of Australia Rate Decision 1.50%
April 4th 18:30 GBP Construction PMI (MAR) 52.5
April 4th 19:00 EUR Eurozone Retail Sales (YoY) (FEB) 1.0%
April 4th 22:30 USD Trade Balance (FEB) -44.7 billion