Rising Consumer Confidence Fails to Support Australian Dollar
An uptick in the Westpac consumer confidence index was not enough to shore up the Australian Dollar yesterday, even as sentiment saw a solid improvement on the month. The positive data was overshadowed by a raft of underwhelming Chinese industrial production and retail sales figures, which suggest that the world’s second largest economy remains under pressure. As market risk appetite diminished once again this left AUD exchange rates on the back foot.
This morning’s labour market data could see the Australian Dollar extend its losses if the headline unemployment rate rises as forecast.
Pound Under Pressure as Withdrawal Agreement Set for Fourth Vote
Reports that Labour MPs could abstain on Theresa May’s withdrawal agreement when it returns to Parliament for a fourth vote at the start of June provoked fresh volatility for the Pound. Markets were unsettled by the latest signs of division between the political parties, with the odds of any breakthrough on Brexit appearing increasingly slim. Although Labour officials pushed back against the suggestion of an abstention this did not offer any boost to weakened GBP exchange rates.
Persistent anxiety over Brexit looks set to keep the Pound on a weaker footing over the course of the day.
Euro Stumbles even as German Economy Demonstrates Resilience
Although the German economy avoided a recession, delivering growth of 0.6% in the first three months of the year, this failed to boost the Euro. The underlying details of the report still paint an uneasy picture of the economic outlook, particularly as business confidence remains muted. While the wider Eurozone also demonstrated solid growth on the year this was not enough to offer EUR exchange rates any rallying point.
Comments from European Central Bank (ECB) policymakers could prompt further volatility for the single currency in the near term.
Surprise Retail Sales Contraction Dents US Dollar
Confidence in the US Dollar diminished on the back of an unexpectedly weak month of US advance retail sales, which disappointed forecasts with a contraction of -0.2%. This suggests that US consumers are taking a less optimistic view of recent trade tensions, raising the prospect of growth weakening in the second quarter. Even though the Empire manufacturing index bettered expectations with solid growth in May this was unable to boost USD exchange rates in the wake of the retail data.
A similar improvement in tonight’s Philadelphia Fed business outlook index may encourage the US Dollar to gain fresh ground against its rivals, though.
Inflation Uptick Benefits Canadian Dollar
As April’s Canadian consumer price index picked up from 1.9% to 2.0% on the year, as forecast, this offered a boost to CAD exchange rates. With inflation now matching the Bank of Canada’s (BOC) target rate the risk of imminent monetary loosening appeared to diminish, improving the appeal of the Canadian Dollar. Even so, with market risk appetite still generally limited the gains of CAD exchange rates proved slim.
If tonight’s manufacturing sales data shows a rebound on the month, however, this could help the Canadian Dollar strengthen.
Global Trade Anxieties Weigh on New Zealand Dollar
The latest underwhelming economic data from China weighed heavily on the New Zealand Dollar yesterday as investors adopted a more risk-averse mentality. With global trade looking set to slow and the health of the global economy waning the appeal of the risk-sensitive NZD naturally weakened. Lacking the support of any fresh domestic data the New Zealand Dollar struggled to find any particular traction.
As long as worries over the global growth outlook persist NZD exchange rates look set to maintain a bearish bias.
Data Releases
May 16th 11:30 AUD Unemployment Rate (APR) 5.1%
May 16th 19:00 EUR Eurozone Trade Balance (MAR) 19 billion
May 16th 22:30 CAD Manufacturing Sales (MoM) (MAR) 1.5%
May 16th 22:30 USD Philadelphia Fed Business Outlook (MAR) 9.0