Strengthening Growth Bolsters Australian Dollar
As the Australian manufacturing and services PMIs picked up on the month in May, moving further into expansion territory, this encouraged the Australian Dollar to strengthen against its rivals. With the composite PMI no longer showing a stagnation confidence in the outlook of the Australian economy naturally improved. AUD exchange rates remained under pressure thanks to the continued escalation of US-China trade tensions overnight, although this was not enough to reverse their uptrend.
Without the support of fresh data, however, market anxiety could see the Australian Dollar trending lower once again today.
Pound Volatile as Theresa May Holds Onto Power
Political anxiety weighed heavily on the Pound yesterday as a cabinet revolt attempted to oust Theresa May in response to the concessions offered alongside her much-maligned withdrawal agreement. However, as May held onto her position as Prime Minister for another day this saw GBP exchange rates recover some of their lost ground as market sentiment temporarily improved. Hopes that the Brexit deadline could see a further extension in response to a fresh Conservative leadership contest also helped to limit the losses of the Pound.
As forecasts point towards a contraction in UK retail sales on the month this may prompt another bout of GBP exchange rate weakness.
Underwhelming Eurozone PMIs Put Pressure on Euro
May’s Eurozone manufacturing and services PMIs showed a continued slowdown on the month, leaving the Euro on a weaker footing. As the Eurozone and German manufacturing sectors remain firmly within contraction territory worries over the strength of the economic outlook picked up. The release of the latest European Central Bank (ECB) meeting minutes added to the bearishness of EUR exchange rates as policymakers adopted an increasingly cautious tone on growth.
The increasing risk of the ECB maintaining a dovish outlook for the foreseeable future could keep the Euro under pressure today.
US Dollar Weakens as New Home Sales Slump
In another blow to the US economy April’s new home sales data saw a -6.9% contraction on the month. With the domestic housing market continuing to show signs of a slowdown confidence in the wider economic outlook also deteriorated. As the latest escalation of the US-China trade spat looks set to weigh heavily on the US economy investors saw little reason to favour the US Dollar over its rivals last night.
If tonight’s durable goods orders figure contracts as forecast this may prompt USD exchange rates to shed further ground.
Sharp Increase in Wholesale Trade Sales Fails to Boost Canadian Dollar
Canadian wholesale trade sales leapt above forecasts in March, clocking in at growth of 1.4% on the month and boosting hopes of greater economic resilience. While the improvement suggests a greater level of confidence within the domestic economy, though, this was not enough to boost CAD exchange rates overnight. Investors were instead discouraged by a major decline in oil prices, which saw Brent crude drop to just over US$68 per barrel.
As long as the oil market remains in a bearish mood demand for the Canadian Dollar is unlikely to pick up.
New Zealand Dollar Loses Traction Ahead of Trade Data
NZD exchange rates benefitted from the relative strength of the Australian Dollar yesterday, following their antipodean cousin higher across the board. Although global trade tensions persist this failed to keep the New Zealand Dollar down, especially as the Federal Reserve looks increasingly likely to leave interest rates on hold. Even so, mounting anticipation ahead of this morning’s raft of trade figures limited the potential for NZD exchange rate gains.
As the trade surplus is forecast to narrow from 922 million to 400 million this morning the mood towards the New Zealand Dollar could sour further.
Data Releases
May 24th 08:45 NZD Trade Balance (APR) 400 million
May 24th 18:30 GBP Retail Sales ex Auto Fuel (MoM) (APR) -0.5%
May 24th 22:30 USD Durable Goods Orders (APR) -2.0%