Australian Dollar
A surge in iron ore prices inspired investors to return to the Australian Dollar on Friday. The commodity had declined significantly earlier in the week, but prices bounced back 7% as the weekend approached. Although US President Donald Trump ordered a trade probe into nations like China that export cheap steel to the US, reigniting fears of a trade war, investors were not perturbed and so the ‘Aussie’ made solid gains.
A softer interest rate outlook battered the Australian Dollar last week, but with a speech from Reserve Bank of Australia (RBA) Governor Philip Lowe and first quarter inflation data set for release on Wednesday, there could be further wobbles on changing expectations for monetary policy.
Sterling
The Australian Dollar was able to record minor gains versus Pound Sterling on Friday after UK retail data revealed sales fell at their fastest pace in seven years during March. Month-on-month retail sales were expected to decline -0.5% after February’s upwardly revised 1.6% growth, but instead fell -1.5%. Year-on-year sales growth slowed from 4.1% to 2.6% – a much more marked decline than the downtick to 3.8% expected. While the Pound declined, losses were curbed by comments from Monetary Policy Committee (MPC) member Michael Saunders, who claimed he was becoming more inclined to vote to hike interest rates.
The UK’s first-quarter GDP figures will be released on Friday. Investors are expecting the pace of economic activity to have weakened, so the AUD/GBP exchange rate could soar if the data confirms their worst fears.
Euro
The final day of trading before the first round of the French Presidential Election unsurprisingly saw the Euro weakening. A series of largely above-forecast preliminary PMIs for April suggested that the Eurozone economy started the second quarter of the year on a strong footing, even if the German services and composite indices disappointed. Nonetheless, investors were only focussed on politics and so EUR declined.
By Thursday the volatility from the first round of voting in the French presidential election may have subsided. The Euro won’t be in for a quiet ride, however, as the European Central Bank (ECB) will announce their latest monetary policy decisions. No changes are expected, but traders will be on the lookout for more signs the Governing Council is considering tapering the quantitative easing programme.
US Dollar
The US Dollar was on mixed form on Friday, weighed upon by disappointing domestic data but supported by political uncertainty in the Eurozone ahead of the French elections. Markit’s manufacturing and services PMIs declined to 52.8 and 52.5 respectively; both unexpectedly weakening against predictions of a rise. The composite inched down from 53 to 52.7.
Wednesday’s consumer confidence figures for April are predicted to weaken slightly. This could further disappoint investors, who are left facing the possibility that the Federal Reserve won’t drastically tighten monetary policy this year as originally hoped.
Canadian Dollar
Disappointing consumer price index figures for March weakened the Canadian Dollar on Friday. Inflation had been forecast to rise to 0.4% on the month, but instead held steady at 0.2%. Year-on-year, prices grew 1.6% – a bigger slowdown than the drop from 2% to 1.8% forecast.
Canada’s GDP figures for February are set for release on Friday, which could provide something to distract investors from oil and trade concerns.
New Zealand Dollar
Poor domestic data failed to prevent the New Zealand Dollar from making strong advances on Friday. The ANZ consumer confidence index weakened -2.8%, taking it down from 125.2 to 121.7. But signs that Japan had changed its mind regarding its involvement in the Trans Pacific Partnership (TPP) since the US withdrew was giving investors hope. Japanese officials had previously said that they saw no point in continuing with ‘TPP-1’, but on Friday New Zealand’s Trade Minister Todd McClay described Japan as ‘showing leadership around a common set of trade rules’.
There is no headline data due for release from New Zealand this week, but Friday’s trade balance figures for March are likely to cause significant movement for the New Zealand Dollar.
Data Released
April 26th AUD RBA Governor Lowe Speech
April 26th 00.00 USD Consumer Confidence (APR)
April 27th 21.45 EUR European Central Bank Rate Decision (APR 27) 0.00%
April 28th 08.45 NZD Trade Balance (MAR)
April 28th 18.30 GBP Gross Domestic Product (YoY) (1Q A) 2%
April 28th 22.30 CAD Gross Domestic Product (YoY) (FEB)