Australian Dollar
Demand for the Australian Dollar picked up somewhat ahead of the weekend thanks to an increase in market risk appetite. With base metal prices generally rallying investors saw little reason not to buy into the ‘Aussie’, even as copper prices failed to join in on the uptick. Even though market concerns remain over the protectionist stance of the Trump administration and the prospect of a US-China trade war this failed to prevent AUD exchange rates pushing higher on Friday.
With fresh domestic data a little thin on the ground this week the Australian Dollar could struggle to maintain a positive trend.
Sterling
Brexit-based uncertainty remained a significant drag on Sterling during trade on Friday. Investors were discouraged by comments from Irish Prime Minister Leo Varadkar, who expressed concern that the UK is still at risk of failing to secure a withdrawal agreement. With progress on the issue of the Irish border lacking there are fears that negotiations between the UK and the EU could stall in the months ahead. This naturally left GBP exchange rates on a downtrend.
Unless there are signs of increased unity within Theresa May’s cabinet the mood towards the Pound is likely to remain muted.
Euro
There was some disappointment as the Eurozone trade surplus failed to widen quite as far as forecast in March, clocking in at 26.9 billion rather than 27.9 billion. While this was still a solid improvement on the month the mood towards the Euro nevertheless soured. Political jitters weighed heavily on the single currency at the end of the week, with the Italian populist alliance edging closer to securing power.
Worries over the potential impact that this Eurosceptic Italian government could have on the wider Eurozone look set to limit the appeal of the Euro over the coming days.
US Dollar
Comments from Federal Reserve policymakers failed to cause much of a stir last week, offering no fresh insight into the outlook for monetary policy. This limited the scope for US Dollar strength, particularly as commodity prices pushed higher once again. However, with markets still jittery over the prospect of a potential US-China trade war USD exchange rates held onto a fairly solid footing across the board.
An uptick in the Chicago Fed national activity index may offer the US Dollar an additional boost tonight.
Canadian Dollar
Investors were unimpressed to find that the headline Canadian consumer price index had unexpectedly dipped from 2.3% to 2.2% on the year. While both the monthly and core inflation figures proved a little more positive this was not enough to prevent the Canadian Dollar slumping against its rivals. Even as markets remained optimistic over the outlook for oil prices CAD exchange rates slid sharply heading into the weekend.
If oil prices fall back in the face of increasing US production, though, this could exacerbate the softness of the Canadian Dollar.
New Zealand Dollar
Reaction to the 2018 New Zealand Budget proved rather limited as investors saw little cause for either excitement or alarm within the details of the spending plans. Even so, with market risk appetite improving somewhat the New Zealand Dollar was able to recover ground against many of the majors. Recent weakness has also helped to bolster the appeal of the higher-yielding ‘Kiwi’.
As growth in retail sales is forecast to slow in the first quarter, however, NZD exchange rates may see fresh losses today.
Data Released
May 21st 08:45 NZD Retail Sales ex Inflation (QoQ) (1Q) 0.5%
May 21st 22:30 USD Chicago Fed National Activity Index (APR) 0.25