Economic Optimism Pushes Australian Dollar Higher
March’s Westpac leading index offered AUD exchange rates a boost yesterday, with the index’s modest uptick pointing towards greater resilience within the Australian economy. The appeal of the Australian Dollar increased further on the back of the first quarter Chinese gross domestic product data. As the world’s second largest economy avoided another quarter of easing growth investors were encouraged to adopt a more risk-positive outlook, shoring up AUD exchange rates.
With the unemployment rate forecast to increase from 4.9% to 5.0% this morning, however, demand for the Australian Dollar could diminish once again.
Pound Under Pressure After Inflation Misses Forecast
The latest UK inflation data failed to encourage demand for the Pound last night as price pressures failed to pick up on the year. Investors were disappointed to find that the consumer price index held steady at 1.9% rather than rising to 2.0%, keeping inflation below the Bank of England’s (BoE) target rate. With UK house prices also under pressure in the face of political uncertainty GBP exchange rates were left on a weaker footing.
Even so, as retail sales are forecast to show a solid acceleration in March the mood towards the Pound could soon improve.
Stronger Trade Data Shores up Euro
Confidence in the outlook of the Eurozone economy improved on the back of February’s trade data, which saw the surplus widen from 1.8 billion to 17.9 billion. This sharp improvement suggests that the currency union has largely shaken off global trade tensions, bolstering hopes that economic growth could recover in the months ahead. However, as trade tensions between the EU and US showed fresh signs of flaring up this limited the gains of EUR exchange rates overnight.
Unless April’s Eurozone manufacturing and services PMIs demonstrate signs of resilience the Euro looks vulnerable to further selling pressure this evening.
Narrowed Trade Deficit Fails to Boost US Dollar
Even though the US trade deficit unexpectedly narrowed in February, shrinking from -51.1 billion to -49.6 billion, this failed to boost the US Dollar last night. As wholesale inventories saw a sharp drop on the month USD exchange rates came under renewed pressure, with confidence in the health of the world’s largest economy still limited. The general improvement in market risk appetite following the stronger Chinese growth data also helped to weigh down the US Dollar.
A strong rebound in advance retail sales could see USD exchange rates trending higher once again tonight, however.
Canadian Dollar Benefits from Inflation Uptick
As anticipated, the headline Canadian consumer price index picked up from 1.5% to 1.9% in March. With inflationary pressure mounting the mood towards the Canadian Dollar largely improved, with the Bank of Canada (BOC) looking less likely to take a dovish outlook on monetary policy. Coupled with the general improvement in market sentiment this helped CAD exchange rates to extend their uptrend.
However, with retail sales forecast to contract on the month in February the Canadian Dollar may struggle to hold onto its gains for long.
Inflation Disappointment Drives Down New Zealand Dollar
In a blow to the New Zealand Dollar the first quarter consumer price index slumped from 1.9% to 1.5%. While forecasts had pointed towards an easing in inflation this sharp decline raises the risk of the Reserve Bank of New Zealand (RBNZ) cutting interest rates in the near future. This disappointing development left NZD exchange rates on a downtrend, even as the wider sense of market risk appetite increased.
In the absence of any fresh domestic data the New Zealand Dollar is likely to remain under pressure today.
Data Releases
April 18th 11:30 AUD Unemployment Rate (MAR) 5.0%
April 18th 18:00 EUR Eurozone Manufacturing PMI (APR) 47.9
April 18th 18:00 EUR Eurozone Services PMI (APR) 55.1
April 18th 18:30 GBP Retail Sales ex Auto Fuel (YoY) (MAR) 4.0%
April 18th 22:30 CAD Retail Sales (MoM) (FEB) 0.4%
April 18th 22:30 USD Advance Retail Sales (MoM) (MAR) 0.8%