Australian Dollar
Appetite for the commodity-correlated ‘Aussie’ picked up on Wednesday in the wake of a better-than-expected Chinese consumer price index. As Chinese inflation strengthened from 0.9% to 1.2% on the year in April confidence in the outlook of the world’s second largest economy improved. An improvement in copper prices also encouraged greater demand for the Australian Dollar, particularly as the US Dollar weakened.
With no Australian data set for release today, the ‘Aussie’ may struggle to hold onto its gains if markets return to a state of risk aversion.
Sterling
With fresh domestic data lacking, the Pound struggled to gain any particular traction against its rivals. Developments in the general election campaign prompted limited volatility for Sterling, with markets still awaiting the publication of the major parties’ manifestos. Investors have been a little wary of piling into GBP exchange rates ahead of the Bank of England’s (BoE) May policy meeting and the release of its latest quarterly Inflation Report.
Should the BoE’s updated forecasts point towards a continued acceleration in inflationary pressure, and policymakers maintain a neutral policy bias, the Pound could weaken further.
Euro
Comments from European Central Bank (ECB) President Mario Draghi failed to bolster the appeal of the single currency. Alongside a staunch defence of the ECB’s stimulus program Draghi maintained his outlook on monetary policy, suggesting that interest rates are unlikely to rise any time soon. His talking down of the prospect of an imminent tapering of the quantitative easing program left investors with little cause for bullishness. Even so, as reports suggested that the IMF could be coming on-board with the Greek bailout program the mood was not entirely negative.
Even so, if the latest ECB economic bulletin takes a more optimistic view of the Eurozone economy then the Euro may return to an uptrend.
US Dollar
Demand for the ‘Greenback’ weakened sharply after the shock announcement that FBI Director James Comey had been unceremoniously fired. This sudden move further undermined confidence in the Trump administration, evoking memories of Nixon’s sacking of the special prosecutor in charge of the Watergate inquiry. A sense of political uncertainty continued to weigh heavily on the US Dollar overnight with markets unsure of the implications of the controversial decision.
Solid jobless claims figures could offer the US Dollar something of a rallying point, with the Federal Reserve still looking on track to raise interest rates in June.
Canadian Dollar
Oil prices pushed higher after the latest US crude inventories figure showed a larger-than-expected drawdown. While this was not enough to lift Brent crude above the psychologically important US$50 per barrel mark the Canadian Dollar was nevertheless encouraged by the result. With an extension of the OPEC production limiting deal still apparently on the table the appeal of the ‘Loonie’ could increase.
March’s new housing price index may weigh on the Canadian Dollar however though if it offers fresh evidence of a slowdown in the domestic housing market.
New Zealand Dollar
Card spending was found to have jumped 1.1% on the month in April, signalling an uptick in domestic consumer confidence. This set the New Zealand Dollar on a bullish trend, even though the ANZ Truckometer proved rather disappointing. Altogether the picture of the New Zealand economy seemed to remain positive, encouraging investors ahead of today’s Reserve Bank of New Zealand (RBNZ) policy meeting.
If Governor Graeme Wheeler takes a more optimistic view on monetary policy the ‘Kiwi’ could extend its gains today.
Data Released
May 11th 07:00 NZD Reserve Bank of New Zealand Rate Decision 1.75%
May 11th 18:00 EUR ECB Publishes Economic Bulletin
May 11th 21:00 GBP Bank of England Rate Decision 0.25%
May 11th 21:00 GBP Bank of England Inflation Report
May 11th 22:30 CAD New Housing Price Index (YoY) (MAR) 1.75%