Australian Dollar Softens in spite of Manufacturing Improvement
A solid uptick in the Australian manufacturing PMI was not enough to shore up the Australian Dollar yesterday, even as the sector demonstrated strong signs of growth. The disappointing nature of the latest New Zealand employment data put a dampener on AUD exchange rates, following the New Zealand Dollar lower across the board. With market risk appetite generally limited support for the Australian Dollar proved lacking.
Without the support of any fresh domestic data today AUD exchange rates look set to remain on the back foot.
Brexit Speculation Extends Pound Gains
Speculation that the Labour and Conservative leaderships could be approaching a Brexit compromise helped to keep the Pound on a positive trend last night. The disappointing nature of April’s UK manufacturing PMI failed to weigh down GBP exchange rates, even as the sector proved unable to hold onto the momentum gained in March. A sharper-than-expected decline in mortgage approvals was also overshadowed by the sense of investor optimism over the potential Brexit breakthrough.
Even so, any signs of dovishness from the Bank of England (BoE) at tonight’s policy announcement could see the Pound fall out of favour once again.
Euro Muted amid Lack of Eurozone Data
With no fresh Eurozone data releasing on the May Day holiday the appeal of the Euro proved largely limited. Even though the currency union showed signs of strength in Tuesday’s raft of growth data this was not enough to prevent EUR exchange rates remaining under pressure. However, disappointing US manufacturing data helped to limit the downside of the single currency last night.
Easing German retail sales could weigh on the Euro today, given that stronger levels of domestic spending have previously helped to offset the impact of weakening trade conditions.
Manufacturing Weakness Limits US Dollar Strength
The mood towards the US Dollar soured overnight after the ISM manufacturing index showed a larger decline than forecast on the month. As the index sank from 55.3 to 52.8 in April this offered fresh evidence of a slowing US economy, limiting the appeal of the US Dollar. A surprise contraction in construction spending also weighed on USD exchange rates, with confidence in the economic outlook generally diminishing.
Even so, if March’s factory orders data rebounds as forecast tonight this may offer the US Dollar a rallying point against its rivals.
Canadian Dollar Weakens on Manufacturing Sector Contraction
CAD exchange rates experienced fresh selling pressure in the wake of April’s Canadian manufacturing PMI. Investors were discouraged by the PMI’s drop into contraction territory as it eased from 50.5 to 49.7, highlighting the weakening state of the Canadian economy. Coupled with the previous day’s underwhelming gross domestic product data this saw the Canadian Dollar shedding further ground.
Unless the oil market returns to bullish territory in the near future support for the Canadian Dollar is likely to prove muted.
Mixed Labour Market Data Drives Down New Zealand Dollar
Although the first quarter New Zealand unemployment rate tightened from 4.3% to 4.2% NZD exchange rates still turned bearish on Wednesday. The underlying details of the labour market data gave investors little cause for confidence, particularly as the participation rate unexpectedly sank. With wage growth also showing signs of slowing the New Zealand Dollar was left to trend lower against its rivals.
Without a strong showing from the latest building permits data NZD exchange rates look set to maintain a downside bias, given the high odds of an imminent Reserve Bank of New Zealand (RBNZ) interest rate cut.
Data Releases
May 2nd 08:45 NZD Building Permits (MoM) (MAR)
May 2nd 16:00 EUR German Retail Sales (YoY) (MAR)
May 2nd 21:00 GBP Bank of England Rate Decision
May 3rd 00:00 USD Factory Orders (MAR)