Australian Dollar
Risk appetite weakened sharply in the wake of the latest political developments in the US, putting renewed pressure on the ‘Aussie’. Investors were also discouraged to find that the Westpac consumer confidence index had weakened in May, suggesting that the domestic economy remains in less-than-robust health. The appeal of the Australian Dollar also remained limited in anticipation of today’s labour market data, given the notoriously volatile nature of the report.
The Australian Dollar could extend its downtrend if the participation rate weakens in line with forecasts, indicating that the labour market is a long way from being tight.
Sterling
Markets were pleasantly surprised to find that the UK unemployment rate had unexpectedly dipped to 4.6% in the three months to March. As this was the measure’s lowest level since 1975 this encouraged investors to buy back into the Pound in spite of concerning wage data. Weekly earnings remained muted at 2.1% even as inflationary pressure continued accelerating, indicating that consumers are set to experience an even greater squeeze on incomes. Even so, this was not enough to keep Sterling on a weaker footing.
With retail sales forecast to have rebounded on the month in April the Pound could extend its gains further this evening.
Euro
Anti-austerity protests in Athens saw some outbreaks of violence, highlighting the persistent tension that dogs Greece. While government officials are expected to vote through the latest raft of tax reforms and pension cuts agreed with creditors ahead of the weekend, the appeal of the Euro was nevertheless dented. Even so, the single currency benefitted somewhat from the general flight back to safe-haven assets as markets maintain a relatively optimistic outlook for the currency union as a whole.
Confidence in the Euro could weaken more markedly if European Central Bank (ECB) President Mario Draghi takes a particularly dovish tone in comments overnight.
US Dollar
The woes of the White House only worsened as a leaked memo from former head of the FBI James Comey indicated that Donald Trump asked him to let the investigation into Michael Flynn go. This latest revelation further undermined confidence in the current administration, raising concerns that Trump will never be able to deliver on his promised fiscal reforms. However, while this put the US Dollar under pressure, the news also prompted investors to sell out of risk-sensitive assets such as the Australian Dollar.
Tonight’s jobless claims figures and Philadelphia Fed index could help to shore up the ‘Greenback’, provided both point towards a resilient US economy.
Canadian Dollar
Although US crude stockpiles fell in the last week the dip failed to live up to market expectations, limiting the positive impact on oil prices. As a result the Canadian Dollar struggled to find any particular traction against its rivals, with the global oversupply glut likely to persist for the foreseeable future. While manufacturing sales rebounded on the month in March this also fell short of forecast, offering little cause for encouragement.
Ahead of Friday’s consumer price index report the mood towards the ‘Loonie’ could improve, with inflation believed to have picked up in April.
New Zealand Dollar
First quarter producer prices showed a modest weakening on Wednesday, prompting the ‘Kiwi’ to trend lower against many of the majors. This softer showing adds to evidence that inflationary pressure in the New Zealand economy is still relatively modest. With the Reserve Bank of New Zealand (RBNZ) looking set to leave monetary policy on hold for the foreseeable future the appeal of the antipodean currency was rather limited.
Any weakness in the ANZ consumer confidence index could put additional downside pressure on the New Zealand Dollar today.
Data Released
May 18th 11:00 NZD ANZ Consumer Confidence Index (May)
May 18th 11:30 AUD Employment Change (APR) 5,000
May 18th 11:30 AUD Unemployment Rate (APR) 5.9%
May 18th 18:30 GBP Retail Sales (YoY) (APR) 2.6%
May 18th 22:30 USD Philadelphia Fed (MAY) 18.5
May 19th 03:00 EUR ECB’s Draghi Speaks in Tel Aviv