Australian Dollar (AUD) Boosted by Subsiding Trade War Fears
With US/China trade tensions easing, commodity-correlated currencies like the Australian Dollar enjoyed a strong start to the week.
The ‘Aussie’ surged against the Pound, Euro and US Dollar.
Today’s ANZ Roy Morgan consumer confidence index isn’t likely to have much impact on AUD exchange rates, but tomorrow’s speech from Reserve Bank of Australia (RBA) official Michele Bullock could provoke some movement, as could the Westpac leading index and Australia’s skilled vacancy report.
Pound Sterling (GBP) Exchange Rates Tumble on Growing Brexit Uncertainty
The recent downtrend in the Pound (GBP) continued unabated during the European session, with a renewed focus on the uncertainty surrounding Brexit weighing heavily on Sterling sentiment throughout the day.
Looking ahead, the Pound may find some respite from Brexit headlines as the focus returns to the outlook of UK interest rates, with markets likely to play close attention to Bank of England (BoE) Governor Mark Carney’s speech this morning for any hints on whether a rate hike can still be expected this year.
Italian Government Concerns Weigh on Euro Exchange Rates
Jitters over the new populist government in Italy continued to drag on the single currency as a new week of trading got underway.
One of the biggest concerns surrounds the coalition government’s pledge for tax cuts and increased government spending, something which observers suggest will undermine the Eurozone’s push for fiscal responsibility and leave the bloc more exposed to future shocks.
US/China Trade War ‘On Hold’ – US Dollar Surges
The US Dollar spent Monday rallying, driving the Pound US Dollar (GBP/USD) exchange rate to a new 2018 low.
USD posted broad-based gains following the announcement that China had agreed to a trade framework with the US to rebalance the US-China trade deficit.
With fears of a full scale trade war easing and hopes for further rate hikes from the Federal Reserve remaining high, the US Dollar is likely to remain on an uptrend in the near-term.
Canadian Dollar (CAD) Boosted by Oil Prices
Rising oil prices and a risk-on attitude in the face of an easing in US/China trade tensions offset the thin-trading volumes prompted by the Victoria Day holiday and bolstered the Canadian Dollar on Monday.
CAD rose by 0.6% against the Pound and 0.4% against the Euro but failed to gain any traction against the US Dollar.
Risk Appetite Supports New Zealand Dollar (NZD)
Increased demand for commodity-correlated currencies like the Australian and New Zealand Dollars prevented the New Zealand Dollar from sliding at the start of the week despite data showing a drop in NZ credit card spending.
Growth in card spending increased 0.6% month-on-month in April, down from growth of 1.1% in March.
Meanwhile retail sales excluding inflation came in at 0.1% on the quarter rather than the 1.0% predicted.
According to Westpac economist Satish Ranchhod: ‘This signals downside risk to our Q1 gross domestic product forecast and chimes with other signs that the economy is slowing.’
While the New Zealand Dollar declined against the US Dollar on Monday, it recorded gains against the Pound and Euro.
With NZ data in short supply until later in the week, risk appetite is likely to be the driving force behind NZD exchange rate movement.
Data Released
09:30 AUD ANZ Roy Morgan Weekly Consumer Confidence Index
18:15 GBP BoE’s Carney, Ramsden, Saunders, Vlieghe Speak in London
18:30 GBP Public Sector Net Borrowing
20:00 GBP CBI Trends Total Orders