Election Surprise Fuels Australian Dollar Strength
After the Liberal-National coalition came out on top in Sunday’s election the mood towards the Australian Dollar significantly improved. Markets took relief from the prospect of political continuity, especially after opinion polls had pointed towards a change in leadership. With this sense of political uncertainty dismissed AUD exchange rates were able to push higher across the board, even as global trade tensions persisted.
Even so, the release of the Reserve Bank of Australia’s (RBA) latest set of meeting minutes could see the Australian Dollar fall out of favour once again today.
Political Concerns Continue to Weigh on Pound
Anxiety over Brexit and the prospect of further UK political disruption continued to weigh on the Pound at the start of the week. Now that the cross-party talks between Labour and the Conservatives have collapsed the issue of Brexit looks set to remain unresolved for longer, to the disappointment of investors. Lacking the support of any fresh UK data GBP exchange rates struggled to find any particular traction last night.
Another negative month for the CBI industrial trends orders index may keep the Pound on a weaker footing against its rivals in the near term.
Euro Slips in Spite of Higher Producer Price Index
Although April’s German producer price index figures bettered forecasts this was not enough to shore up EUR exchange rates overnight. While the higher readings suggest that inflationary pressure is still building within the Eurozone’s powerhouse economy the odds of any imminent European Central Bank (ECB) action remain slim. As global trade tensions continued to heighten this left the Euro under pressure, given the German economy’s vulnerability to slowing trade.
Tonight’s finalised Eurozone consumer confidence index is unlikely to boost the Euro, with forecasts pointing towards another weak month of sentiment.
Weaker National Activity Index Dents US Dollar
Safe-haven demand limited the downside potential of the US Dollar yesterday as markets continued to assess the implications of the escalating US-China trade dispute. However, USD exchange rates took a knock when April’s Chicago Fed national activity index weakened from -0.15 to -0.43. With the US economy still showing signs of a slowdown the appeal of the US Dollar naturally diminished, taking the wind out of USD exchange rates’ sails.
A solid rebound in US existing home sales may encourage the US Dollar to recover some of its lost ground overnight, however.
Rising Oil Prices Lift Canadian Dollar
As the OPEC-led coalition announced sustained oil production cuts this offered a fresh boost to the commodity-correlated Canadian Dollar at the start of the week. While oil prices struggled to hold onto their full gains for long the bearish mood of the oil market lifted CAD exchange rates. With trade tensions limiting market risk appetite, though, the strength of the Canadian Dollar still proved somewhat muted.
Without the support of fresh domestic data CAD exchange rates may struggle to hold onto a positive footing in the near term.
New Zealand Dollar Shakes Off Underwhelming Services PMI
April’s services PMI proved a little disappointing in nature, easing from 52.3 to 51.8 on the month. Nevertheless, the service sector remained in a positive state of growth, giving the New Zealand Dollar some cause for strength. Although worries over the health of the New Zealand economy persist this was not enough to prevent NZD exchange rates gaining ground.
Any slowdown in credit card spending could return the New Zealand Dollar to a downtrend this morning, however.
Data Releases
May 21st 11:30 AUD Reserve Bank of Australia Meeting Minutes (MAY)
May 21st 13:00 NZD Credit Card Spending (YoY) (APR)
May 21st 20:00 GBP CBI Industrial Trends Orders (MAY) -5
May 22nd 00:00 EUR Eurozone Consumer Confidence Index (MAY) -7.7
May 22nd 00:00 USD Existing Home Sales (MoM) (APR) 2.7%