Australian Dollar Trends Lower After Disappointing Leading Index
A weak reading from April’s Westpac leading index left the Australian Dollar on the back foot yesterday. As the index dropped to -0.1% this raised concerns over the outlook of the Australian economy, with signs pointing towards a fresh slowdown in growth. Coupled with the ongoing sense of market anxiety over the escalating US-China trade dispute investors saw little reason to favour the antipodean currency, leaving AUD exchange rates exposed to selling pressure.
Any signs of an uptick in this morning’s manufacturing and services PMIs, however, may encourage the Australian Dollar to recover some of its lost ground.
Higher Inflation Pushes Pound Down
Although the headline UK consumer price index did not accelerate as far as forecast on the year in April this failed to offer any particular support to the struggling Pound. With inflation above the Bank of England’s (BoE) target at 2.1% and wage growth easing household finances look set to come under further pressure in the months ahead. Political anxiety also weighed heavily on GBP exchange rates amid reports that cabinet MPs were moving to oust Theresa May over Brexit.
As the political situation continues to unfold the mood towards the Pound is unlikely to see any significant improvement, given fears of a potential no-deal Brexit.
Euro Shakes Off Draghi Comments
Comments from European Central Bank (ECB) President Mario Draghi failed to provoke any particular volatility for the Euro as he offered no fresh clues over the current policy outlook. EUR exchange rate momentum proved largely limited in the absence of any fresh economic data, with confidence in the Eurozone outlook still muted. A persistent sense of market risk appetite helped to limit the downside potential of the single currency, though.
Another weak month of growth for the Eurozone manufacturing and services PMIs could prompt the single currency to shed further ground this afternoon.
Escalating Trade Tensions Support US Dollar
As pressure continued to pile onto Chinese telecoms giant Huawei, and the Trump administration suggested the potential blacklisting of other Chinese tech firms, USD exchange rates benefitted from safe-haven demand. With markets seeing the potential for the trade spat to develop into a cold war over technology a sense of risk aversion helped to limit pressure on the US Dollar. Even so, anxiety over the future path of Federal Reserve monetary policy saw USD exchange rates losing some of their momentum.
If US new home sales contract as forecast in April this may leave the US Dollar on a generally weaker footing against its rivals.
Higher US Oil Production Weighs on Canadian Dollar
Another increase in US crude oil production left the Canadian Dollar in a downtrend as oil prices slumped once again. With the US continuing to raise its oil output the risk of a renewed global supply glut remains, in spite of escalating tensions within the Middle East. The limited nature of market risk appetite equally diminished demand for the commodity-correlated Canadian Dollar.
A stronger showing from March’s Canadian wholesale trade sales data could encourage CAD exchange rates to pick up this evening.
Slowing Retail Sales Drag on New Zealand Dollar
Although retail sales excluding inflation bettered forecast in the first quarter, clocking in at 0.7% rather than 0.6%, this still represented a sharp decline on the quarter. As a result, the mood towards the New Zealand Dollar soured further as confidence in the outlook of the domestic economy continued to deteriorate. A decline in prices at the latest Global Dairy Trade auction added to the bearishness of NZD exchange rates.
Without the support of any fresh economic data today the New Zealand Dollar looks set to shed further ground.
Data Releases
May 23rd 09:00 AUD Manufacturing PMI (MAY) 50.3
May 23rd 18:00 EUR Eurozone Manufacturing PMI (MAY) 48.1
May 23rd 18:00 EUR Eurozone Services PMI (MAY) 53.0
May 23rd 22:30 CAD Wholesale Trade Sales (MoM) (MAR) 0.8%
May 24th 00:00 USD New Home Sales (MoM) (APR) -2.5%