Australian Dollar
Disappointing retail sales figures left the ‘Aussie’ on a downtrend across the board, adding to the impression of a weaker Australian economy. Sales were found to have slowed from 0.7% to 0.1% in the first quarter, pointing towards a softening in consumer confidence. Reaction to the 2017 Budget also dented the Australian Dollar, with markets somewhat sceptical over the various announced changes and the controversial tax bill for the big banks.
The fallout from the Budget is likely to provoke further jitters for the ‘Aussie’ today as the details are pored over, particularly if general market risk appetite remains limited.
Sterling
In a significant upside surprise the British Retail Consortium (BRC) like-for-like sales were found to have risen 5.6% on the year in April. While this surge was largely thanks to the timing of the Easter holidays the Pound was still prompted to trend higher against many of the majors. Domestic political developments failed to provoke any particular jitters, meanwhile, as markets continue to brace for the Conservatives to win an increased majority in the general election.
Ahead of the Bank of England (BoE) policy meeting and inflation report Sterling may struggle to find particular traction.
Euro
After the relief rally that followed Emmanuel Macron’s election as the next French president rapidly dissipated the mood towards the single currency has been a little muted. Even so, a better-than-expected raft of German trade data helped to bolster the appeal of the Euro. Germany’s trade surplus rose to 25.4 billion in March, signalling that the Eurozone’s powerhouse economy remains in a robust state. While doubts remain over the outlook of the currency union as a whole, this was enough to boost the Euro against some of its more risk-sensitive rivals.
Comments from European Central Bank (ECB) President Mario Draghi could weigh on demand tonight, with the policymaker likely to maintain a relatively dovish view on monetary policy.
US Dollar
April’s NFIB small business optimism index showed a smaller decline than forecast, offering fresh support to the ‘Greenback’. As the appeal of higher-yielding currencies remained limited the US Dollar made bullish gains, with confidence in the health of the US economy improving. Markets are continuing to bet that the Federal Reserve will raise interest rates at its June policy meeting, helping to keep USD exchange rates buoyant.
However, the US Dollar could experience downside pressure if April’s monthly budget statement shows a widening of the deficit.
Canadian Dollar
An unexpected contraction in Canadian building permits undermined confidence in the strength of the domestic economy, pointing towards a weakening in the housing market. However, after sustained pressure from falling oil prices investors were encouraged to buy back into the softened Canadian Dollar overnight. While there are talks of OPEC extending its production limiting deal past June, though, the outlook for oil remains bearish.
If tonight’s US crude inventories figure points towards a dip in domestic stockpiles, the ‘Loonie’ could strengthen further on the back of an improved oil market.
New Zealand Dollar
With risk appetite generally limited the New Zealand Dollar remained on a weaker footing on Tuesday. A lack of fresh domestic data gave investors little in the way of motivation, keeping the ‘Kiwi’ under some pressure against its rivals. The appeal of the antipodean currency also remained limited in anticipation of Thursday’s Reserve Bank of New Zealand (RBNZ) policy decision.
Confidence in the New Zealand Dollar could pick up somewhat this morning, though, if April’s card spending figures point towards greater consumer optimism.
Data Released
May 10th 08:45 NZD Card Spending (MoM) (APR)
May 10th 21:00 EUR European Central Bank President Draghi Speech
May 11th 04:00 USD Monthly Budget Statement (APR)
May 11th 07:00 NZD Reserve Bank of New Zealand Rate Decision 1.75%