Australian Dollar
Comments from Reserve Bank of Australia (RBA) Governor Philip Lowe failed to offer any support to the ‘Aussie’ on Thursday, with the policymaker sounding another warning over the temperature of the housing market. Investors were also disappointed to find that March’s trade surplus had narrowed further than anticipated, undermining confidence in the health of the domestic economy. With speculation over the policy outlook of the RBA reignited, the Australian Dollar came under increased pressure, trending lower across the board.
If the RBA’s monetary policy statement proves similarly dovish then AUD exchange rates could fall further this morning.
Sterling
An improved services PMI rounded out a positive raft of UK PMIs, pointing towards the economy regaining some of its lost momentum at the start of the second quarter. However, while the Pound made fresh gains on the back of this stronger showing investors saw some cause for hesitance. Details of the report indicated that inflationary pressures within the economy have continued to mount, a concerning sign when consumers are already showing signs of reining in their spending.
Developments in the Brexit situation could weigh on Sterling today, with the results of local elections also having the potential to influence sentiment if the Conservatives make significant gains.
Euro
In a positive sign for the Eurozone economy, March’s retail sales showed an uptick of 2.3% on the year, indicating an improvement in domestic consumer sentiment. Coupled with bullish Spanish and Italian services PMIs this boosted the appeal of the Euro, encouraging bets that the currency union will see strong growth in the second quarter. Confidence was also boosted by centrist Emmanuel Macron’s performance in the final debate of the French presidential campaign. With markets continuing to bet on a solid win for Macron, the mood towards the single currency remained positive.
Even so, election jitters are likely to put downside pressure on the Euro as France prepares to go to the polls once again.
US Dollar
Although it came as no surprise that the Federal Reserve opted to leave interest rates unchanged for another month the ‘Greenback’ strengthened sharply in the wake of the May meeting. The accompanying statement proved more hawkish than markets had anticipated, prompting the odds of a June rate hike to leap. As the US trade balance unexpectedly narrowed in March and jobless claims fell, the mood towards the US Dollar remained generally positive overnight.
USD exchange rates could be knocked back if tonight’s raft of labour market data fails to impress, particularly if wage growth proves underwhelming.
Canadian Dollar
Weakening oil prices weighed heavily on the Canadian Dollar overnight, with Brent crude falling back below the US$50 per barrel mark to clock a five-month low. A smaller-than-expected decline in US stockpiles undermined the appeal of the commodity, particularly as doubts mount over the prospect of OPEC extending its production limiting agreement. With the global oversupply glut looking set to persist for some time yet the ‘Loonie’ trended lower.
If April’s Canadian unemployment rate holds steady then the Canadian Dollar could find some measure of support ahead of the weekend.
New Zealand Dollar
Demand for the ‘Kiwi’ weakened in the wake of a disappointing ANZ commodity price index, which showed a fresh contraction on the month. This was not seen to bode well for the domestic economy, signalling softened demand for New Zealand exports. With risk appetite also limited in the wake of the Fed policy meeting there was little reason for investors to favour the New Zealand Dollar on Thursday.
Volatility is expected in response to the Reserve Bank of New Zealand’s (RBNZ) latest two-year inflation expectation forecast, with a more hawkish outlook likely to boost bets on a move towards a tightening bias.
Data Released
May 5th 09:30 AUD Construction PMI (APR)
May 5th 11:30 AUD Reserve Bank of Australia Statement of Monetary Policy
May 5th 13:00 NZD Reserve Bank of New Zealand 2-Year Inflation Expectation (2Q) 52
May 5th 18:10 EUR German Construction PMI (APR)
May 5th 22:30 USD Change in Non-Farm Payrolls (APR) 190,000
May 5th 22:30 CAD Unemployment Rate (APR) 6.7%