Australian Dollar
A steady NAB business confidence index encouraged the ‘Aussie’ to make gains against many of its rivals on Thursday. With optimism in the outlook of the domestic economy boosted and safe-haven demand softening the antipodean currency benefitted. This helped to ease worries that the Reserve Bank of Australia (RBA) will not return to a tightening bias in the foreseeable future. Falling odds of an imminent US interest rate hike also gave the Australian Dollar support.
With no fresh domestic data set for release ahead of the weekend the ‘Aussie’ could be vulnerable, particularly if commodity prices come under renewed pressure.
Sterling
Speculation that the general election will lead to a larger Conservative majority and a softer form of Brexit kept the Pound on a stronger footing. With investors betting that the election will result in less political uncertainty in the longer term demand for Sterling remained elevated. However, if the vote does indeed result in more limited opposition party influence in the Brexit process the UK could still find itself heading for a hard exit. Political jitters are still expected to put some pressure on GBP exchange rates in the coming days, though, as the outcome of the election is far from a done deal.
Should March’s retail sales figures show a contraction in consumer spending then the Pound could give up some of its recent gains.
Euro
As the latest opinion polls continued to point towards centrist candidate Emmanuel Macron emerging as the winner of the French presidential election demand for the Euro picked up. Even so, the possibility of an upset remains high, given that the four major contenders are all polling in the region of 20%. Election jitters were also limited by a better-than-expected uptick in the Eurozone consumer confidence index, which strengthened from -5 to -3.6. With a greater sense of optimism prevailing the single currency trended higher against many of the majors.
As the latest raft of Eurozone manufacturing and services PMIs are expected to show a modest slowdown, however, EUR exchange rates could be knocked back today.
US Dollar
The odds of the Federal Reserve raising interest rates in June dipped sharply overnight, falling to just 44% from more than 60% earlier in the month. With policymakers looking to be taking a more gradual approach to monetary tightening this prompted the US Dollar to retreat. Despite the leading index for March showing a more modest weakening than anticipated, confidence in the robustness of the US economy remained limited. Coupled with a disappointing Philadelphia Fed manufacturing index this gave investors little reason not to sell out of the ‘Greenback’.
Even so, if April’s manufacturing and services PMIs point towards an increase in economic activity or geopolitical tensions rise the US Dollar could return to a stronger footing.
Canadian Dollar
Despite a disappointing US inventories figure oil prices pushed higher during Thursday’s European session, offering some support to the commodity-correlated Canadian Dollar. Markets were encouraged by reports that the OPEC-led coordinated output cuts could be extended, potentially by as much as six months. With rising US production weighing on the market any further move to limit output by other nations bodes well, which could benefit the Canadian Dollar if Brent crude breaks back above the US$55 per barrel mark.
However, if Canadian inflation is found to have fallen back from 2.0% to 1.8% in March this could leave the ‘Loonie’ on a weaker footing going into the weekend.
New Zealand Dollar
The ‘Kiwi’ received a strong boost from the first quarter consumer price index, which surged from 1.3% to 2.2% on the year. With inflation now in the upper half of the Reserve Bank of New Zealand’s (RBNZ) target range confidence in the antipodean currency strengthened. However, the central bank is unlikely to consider tightening monetary policy any time in the near future as much of this increase is attributable to higher oil prices. With inflationary pressure unlikely to sustain itself at this level the New Zealand Dollar struggled to hold onto its initial gains.
If April’s ANZ consumer confidence index shows a recovery in sentiment, though, the ‘Kiwi’ could return to a stronger footing today.
Data Released
April 20th 11:00 NZD ANZ Consumer Confidence Index (APR)April 20th 17:30 EUR Germany Manufacturing PMI (APR P) 58
April 20th 17:30 EUR Germany Services PMI (APR P) 55.5
April 20th 18:30 GBP Retail Sales (MoM) (MAR) -0.5%
April 20th 22:30 CAD Consumer Price Index (YoY) (MAR) 1.8%
April 20th 23:45 USD Manufacturing PMI (APR P) 53.5
April 20th 23:45 USD Services PMI (APR P) 53