Australian Dollar
Wednesday proved to be a rather volatile day for the Australian Dollar, with the latest raft of domestic data painting a somewhat mixed picture. A surprise contraction in building approvals on the year undermined any particular sense of confidence in the outlook of the Australian housing market. However, as February’s retail sales data showed a 0.6% uptick on the month this helped to offset the weaker showing. As a result, AUD exchange rates were able to make some gains yesterday.
Even if the Australian services PMI betters forecast this morning, though, the Australian Dollar may struggle to hold onto an uptrend if the general sense of market risk appetite deteriorates further.
Sterling
Confidence in the Pound took a fresh hit as the latest UK construction PMI fell significantly short of forecast. Investors were not impressed to find that the construction sector had fallen back into a state of contraction in March, with the index dipping sharply from 51.4 to 47.0. This did not encourage a particular sense of optimism in the domestic outlook, even though the construction sector only accounts for a relatively small proportion of the gross domestic product.
Sterling could still find support, however, if the services PMI prints positively, given that the service sector remains the engine of the UK economy.
Euro
There was some disappointment as the Eurozone consumer price index core failed to push higher in March as anticipated. This is likely to keep the European Central Bank (ECB) in a more dovish mind-set, limiting the potential of the Euro in the longer term. Even so, EUR exchange rates still found support yesterday thanks to the continued tightening of the Eurozone labour market. With unemployment at a fresh nine-year low the softness of the single currency was a little more limited.
Solid Eurozone retail sales figures may help the Euro to extend its gains further this evening.
US Dollar
A softening of the ISM non-manufacturing composite index added to the bearish mood of the US Dollar overnight. Coupled with Monday’s weak manufacturing index this suggests that the world’s largest economy is not in the most robust of states at present. Further pressure was heaped onto USD exchange rates by the latest escalation in trade tensions between the US and China, with the latter announcing tariffs on key US products such as soy beans and aeroplanes.
Any narrowing of the US trade deficit could give the US Dollar a boost tonight, although developments related to China are likely to remain the key source of volatility in the short term.
Canadian Dollar
Even though markets remain optimistic over the prospect of an imminent NAFTA deal CAD exchange rates still came under pressure thanks to a deterioration in overall market sentiment. With the threat of a US-China trade war still hanging over the global economy, and oil prices on the back foot again, the Canadian Dollar found little in the way of support. While US stockpiles showed an unexpected drawdown on the week this was not enough to shore up the commodity-correlated CAD.
Ahead of tomorrow’s Canadian labour market data the potential for a CAD exchange rate rally looks rather muted at best.
New Zealand Dollar
While global trade war fears mounted once again the New Zealand Dollar was quick to shrug off this negative influence. A modest improvement in the ANZ consumer confidence index helped to push NZD exchange rates higher once again, boosting confidence in the domestic outlook. The New Zealand Dollar was also able to capitalise on a weaker US Dollar, dulling the impact of market jitters.
NZD exchange rates may find additional support on the back of another stronger showing from the ANZ commodity price index.
Data Released
April 5th 08:30 AUD Services PMI (MAR) 53.2
April 5th 11:00 NZD ANZ Commodity Price Index (MAR)
April 5th 18:30 GBP Services PMI (MAR) 54
April 5th 19:00 EUR Eurozone Retail Sales (YoY) (FEB) 2.3%
April 5th 22:30 USD Trade Balance (FEB) -56.6 billion