Australian Dollar
A general weakening in risk appetite saw the ‘Aussie’ soften on Tuesday, with global market developments eroding demand for the commodity-correlated currency. In the absence of any fresh domestic data the Australian Dollar came under pressure as anticipation mounted for Donald Trump’s promised tax reform plan. Confidence was also dented by a report from BMI Research which forecast that iron ore prices will remain on a downtrend until 2021, boding ill for the domestic mining sector.
If the first quarter consumer price index shows a solid increase in inflationary pressure, however, the Australian Dollar could see a rally this morning.
Sterling
Even though UK public sector net borrowing was found to have been higher than forecast in March the Pound trended higher overnight. This was largely due to the fact that the annual public deficit has narrowed to its lowest level since the 2007-2008 financial year, suggesting that the economy is returning to its pre-recession health. With markets still confident that the Conservatives will return to power with a larger majority, smoothing the process of Brexit, the underlying bias of the Pound remained bullish.
Even so, with the outcome of the snap general election still far from decided Sterling remains vulnerable to downside pressure.
Euro
Some of the strength was knocked out of the single currency by the news that Marine Le Pen has stepped down as leader of the National Front, ostensibly in a bid to improve her chances with moderate voters. Even so, this failed to dent the Euro for long as markets continued to price in higher odds of centrist Emmanuel Macron becoming president. A better-than-expected French business confidence index also helped to shore up EUR exchange rates during Tuesday’s European session.
Nevertheless, ahead of the European Central Bank’s (ECB) April monetary policy meeting the Euro is likely to struggle to hold onto all of its recent gains.
US Dollar
Reports that Donald Trump is seeking to cut corporation tax from 35% to just 15% gave the US Dollar a boost. Investors had been awaiting details of the Trump administration’s promised tax plans for some weeks, prompting renewed ‘Greenback’ buying. While the move could leave a significant hole in the US budget, and thus face opposition in Congress, this prospect failed to prevent the US Dollar climbing higher against its higher-yielding rivals.
If Thursday’s advance goods trade balance and durable goods orders offer strong showings then USD exchange rates are expected to experience further bullishness, given recent worries over the health of the world’s largest economy.
Canadian Dollar
Doubts continued to mount over the likelihood of OPEC extending its production-limiting agreement, with oil prices remaining under pressure. Markets are still concerned by the buoyancy of US output and its implications for the global oversupply glut. As a result the Canadian Dollar struggled to find any particular cause for confidence on Tuesday, particularly as trade relations with the US showed signs of souring further.
With February’s Canadian retail sales expected to show a sharp dip on the month the ‘Loonie’ is unlikely to return to a stronger footing in the near term.
New Zealand Dollar
With markets closed for ANZAC day there was little in the way of support for the ‘Kiwi’, which trended sharply lower across the board. As the initial relief rally which greeted the news of the French presidential election faded the mood towards the risk-sensitive New Zealand Dollar dimmed. The relative strength of the US Dollar also weighed on the antipodean currency overnight.
If this afternoon’s credit card spending figures point towards stronger consumer confidence then the ‘Kiwi’ could find a rallying point.
Data Released
April 26th 11:30 AUD Consumer Price Index (YoY) (1Q) 2.2%
April 26th 11:30 AUD Consumer Price Index (QoQ) (1Q) 0.6%
April 26th 13:00 NZD Credit Card Spending (YoY) (MAR)
April 26th 22:30 CAD Retail Sales (MoM) (FEB) 0.2%