Australian Dollar
Disappointing Chinese data prompted increased bullishness for the ‘Aussie’, putting fresh downside pressure on commodity prices. Risk appetite was also weakened by surprisingly hawkish Fed meeting minutes and worries ahead of the first meeting between Chinese president Xi Jinping and Donald Trump. Altogether there was little reason for markets to favour the Australian Dollar on Thursday.
Any slowing in March’s construction PMI could encourage the ‘Aussie’ to weaken further this morning, undermining confidence in the strength of the domestic economy.
Sterling
The bullishness that greeted the positive UK services PMI faded on Thursday, leaving the Pound with little in the way of support. Concerns over the consumer outlook have mounted, as signs continue pointing towards inflation rising further in coming months. As Brexit-based uncertainty persists Sterling remains on a generally bearish bias.
Comments from Bank of England (BoE) Governor Mark Carney are expected to put downside pressure on the Pound, with the policymaker likely to reassert the institution’s current neutral bias.
Euro
Comments from European Central Bank (ECB) policymakers prompted volatility for the single currency, with President Mario Draghi reiterating a dovish bias. With the central bank looking unlikely to pursue a tighter course of monetary policy for the foreseeable future, speculation over possible tapering of the quantitative easing program eased. Disappointing Eurozone retail PMIs also weighed on demand for the Euro, offering a reminder that the currency union is not in the most robust economic health.
Any weakening in German exports could put additional pressure on the single currency ahead of the weekend, especially if talks over the Greek bailout give rise to further tension.
US Dollar
The Federal Reserve’s March meeting minutes proved to be slightly more hawkish than anticipated, with policymakers engaging in an extended conversation about shrinking the balance sheet. This suggested that the central bank could tighten monetary policy more aggressively than investors have been forecasting, boosting the ‘Greenback’. Positive jobless claims figures also added to the appeal of the US Dollar, boding well for the upcoming labour market report.
A strong headline figure for March’s non-farm payrolls could see USD exchange rates extending their bullish run.
Canadian Dollar
Although Canadian building permits unexpectedly contracted -2.5% in February this was not enough to dampen the mood towards the ‘Loonie’. While this weaker showing undermined confidence in the health of the domestic economy, investors were more interested in the improving oil price. Markets were quick to recover from the sharp increase in US stockpiles, with investors continuing to bet on an extension of the OPEC production cut even as the oversupply glut looks set to persist.
With March’s labour market data expected to show an uptick in unemployment, though, the Canadian Dollar is likely to soften in the near term.
New Zealand Dollar
With nothing in the way of fresh domestic data to draw upon, the ‘Kiwi’ remained reliant on wider market sentiment. While the New Zealand Dollar was weighed down by the unexpectedly hawkish tone of the latest Fed minutes, this was not enough to keep it on a weaker footing overnight. Investors were also inclined to favour the ‘Kiwi’ over its antipodean cousin, with markets more confident in the outlook of the Reserve Bank of New Zealand (RBNZ).
If today’s US data disappoints then the New Zealand Dollar could benefit from increased demand for higher-yielding currencies.
Data Released
April 7th 09:30 AUD Construction PMI (MAR)
April 7th 16:00 EUR German Trade Balance (FEB) 17.7 billion
April 7th 19:00 GBP BoE Governor Mark Carney speaks in London
April 7th 22:30 CAD Unemployment Rate (MAR) 6.7%
April 7th 22:30 USD Change in Non-Farm Payrolls (MAR) 177,000