Australian Dollar
The Australian Dollar recovered some ground on Wednesday as the sense of market risk aversion eased slightly, even though worries over global geopolitical tensions remain. While Australian building approvals saw a sharper contraction on the month than forecast this failed to particularly weigh on AUD exchange rates. As the US Dollar came under renewed pressure overnight this offered further support to the Australian Dollar, with weaker US growth boding well for the commodity-correlated currency.
Even so, a weaker private sector credit figure could leave AUD exchange rates on a softer footing today.
Sterling
May’s British Retail Consortium (BRC) shop price index did not offer the Pound any particular cause for confidence, contracting -1.1% on the year. This was the index’s weakest reading since January 2017, suggesting that the inflationary pressure on prices that followed the Brexit vote is continuing to ease. As a result, the odds of the Bank of England (BoE) opting to raise interest rates before the end of 2018 diminished further, to the detriment of GBP exchange rates.
As forecasts point towards a sharp increase in net consumer credit on the month Sterling looks vulnerable to additional losses this afternoon.
Euro
While a significant degree of uncertainty continues to hang over Italy’s future the mood towards the Euro was still able to recover yesterday. This was largely due to a better-than-expected performance from the German economy. May’s unemployment rate and consumer price index both offered positive surprises to investors, with unemployment falling to a fresh post-reunification low of 5.2%. As inflation leapt to 2.2% on the year, meanwhile, this fuelled hopes that the European Central Bank (ECB) could take a more hawkish outlook in the coming months.
A similarly strong showing from the Eurozone consumer price index could see EUR exchange rates extending their recovery further.
US Dollar
Disappointment greeted the latest raft of US gross domestic product data, with the annualised growth rate unexpectedly slowing from 2.3% to 2.2%. Coupled with weaker personal consumption expenditure figures this painted a less encouraging picture of the US outlook, suggesting that the economy is less healthy than previously thought. As this softer data could damage the odds of the Federal Reserve pursuing a more aggressive pace of monetary tightening USD exchange rates naturally trended lower.
If April’s personal consumption expenditure core reading fails to impress then the US Dollar looks set to remain under pressure.
Canadian Dollar
Investors were not surprised that the Bank of Canada (BOC) opted to leave interest rates on hold once again at its May policy meeting. Even so, the Canadian Dollar was encouraged to push higher against many of the majors in the wake of the announcement. CAD exchange rates strengthened in response to the more confident tone of policymakers, even though the prospect of another rate hike remains distinctly distant.
Tonight’s Canadian gross domestic product data could spur further gains for the Canadian Dollar, providing that growth remains strong.
New Zealand Dollar
The latest Reserve Bank of New Zealand (RBNZ) Financial Stability Report provoked little reaction from NZD exchange rates. As the RBNZ maintained a cautiously optimistic view of the domestic outlook investors saw no reason to reassess the odds of the central bank returning to a tightening bias. However, as the general sense of market risk appetite picked up in response to disappointing US growth data the New Zealand Dollar pushed higher across the board.
Any weakening of the ANZ activity outlook index may knock NZD exchange rates off their bullish run, however.
Data Released
May 31st 11:00 NZD ANZ Activity Outlook (MAY)
May 31st 11:30 AUD Private Sector Credit (YoY) (APR) 5.0%
May 31st 18:30 GBP Net Consumer Credit (APR) 1.3 billion
May 31st 19:00 EUR Eurozone Consumer Price Index (YoY) (MAY) 1.6%
May 31st 22:30 CAD Gross Domestic Product (YoY) (MAR) 3.0%
May 31st 22:30 USD Personal Consumption Expenditure Core (YoY) (APR) 1.8%