Australian Dollar
Markets saw a fresh bout of jitters overnight as the planned summit between the US and North Korea was dramatically called off. Although there had been signs of rising tensions in recent days the decision still weighed heavily on the mood of investors. This left the risk-sensitive Australian Dollar on a weaker footing, even as the latest raft of US data proved rather mixed in nature.
If global geopolitical tensions start to flare back up once again this could see AUD exchange rates shedding further ground heading into the weekend.
Sterling
A surprisingly strong uptick in UK retail sales encouraged the Pound to strengthen against its rivals on Thursday, suggesting greater confidence amongst consumers. While sales excluding auto fuel were found to have risen 1.5% on the year in April, however, this is unlikely to be enough to alter the policy outlook of the Bank of England (BoE). Even with wage growth now outpacing inflation there are concerns that this improvement is likely to prove short-lived.
Confirmation that the UK economy lost momentum in the first quarter is likely to put fresh pressure on GBP exchange rates today.
Euro
Although the German GfK consumer confidence index showed a slight dip on the month in June this failed to weigh on EUR exchange rates yesterday. The latest German growth data painted a slightly more encouraging picture for the Eurozone’s powerhouse economy, with a sharp uptick in capital investment giving investors cause for optimism. Even though the European Central Bank (ECB) flagged up concerns about protectionism this was not enough to knock the Euro off a stronger footing.
If the German IFO business sentiment survey also points towards greater domestic confidence the Euro could extend its gains further.
US Dollar
The latest bout of market risk aversion was not enough to shore up the US Dollar, even as worries over the prospect of a deterioration in US-North Korea relations picked up. Investors were not impressed to find that initial jobless claims had climbed to a seven-week high. While the US labour market remains in a state of relative tightness this disappointing showing was enough to drag on USD exchange rates.
Commentary from Federal Reserve Chair Jerome Powell could encourage the US Dollar to push higher tonight, especially if durable goods orders better forecast.
Canadian Dollar
The possibility of the US imposing tariffs on car and truck imports prompted investors to pile out of the Canadian Dollar, given the high level of auto exports Canada sends to the US. This did not encourage any particular optimism over the likely future shape of a renegotiated NAFTA deal. Speculation that OPEC could end its production-limiting agreement sooner rather than later also dragged oil prices lower, to the detriment of CAD exchange rates.
With oil likely to remain under pressure in the short term the scope for any Canadian Dollar rally looks limited.
New Zealand Dollar
NZD exchange rates saw some mixed trading on Thursday as market risk appetite deteriorated in the face of geopolitical developments. While the New Zealand Dollar was dented by news of the cancelled US-North Korea summit the ‘Kiwi’ was able to hold onto a stronger footing against its risk-sensitive rivals. A better-than-expected widening of the New Zealand trade surplus also offered encouragement to investors, suggesting greater strength within the domestic economy.
In the absence of any New Zealand data NZD exchange rates look vulnerable to further pressure today.
Data Released
May 25th 18:00 EUR German IFO Business Climate Index (MAY) 102
May 25th 18:30 GBP Gross Domestic Product (YoY) (1Q) 1.2%
May 25th 22:30 USD Durable Goods Orders (APR P) -1.4%