Possible US-China Trade Thaw Boosts Australian Dollar
Hopes of a potential thaw in trade tensions between the US and China helped to limit the downside bias of the Australian Dollar ahead of the weekend. As the Trump administration suggested that embattled telecoms giant Huawei could be part of a possible trade agreement this encouraged a degree of optimism among investors. The weakness of the latest US durable goods orders data also offered a boost to AUD exchange rates as the general sense of market risk appetite picked up.
In the absence of any fresh domestic data today, though, the Australian Dollar may struggle to hold onto a particular traction against its rivals.
May’s Resignation Keeps Pound Under Pressure
Although May’s UK retail sales figures bettered forecasts this was not enough to encourage a GBP exchange rate rally, with signs still pointing towards a struggling high street. Political concerns soon overshadowed the data, though, as Theresa May announced her resignation, triggering another Conservative leadership contest. As this opens the door for a prolonged period of political uncertainty, as well as raising the odds of a no-deal Brexit, the news left the Pound under pressure.
The fallout from the results of the European Parliament elections look set to provoke further volatility for the Pound over the course of the day.
Euro Fails to Shake Off ECB Dovishness
Demand for the Euro remained generally muted ahead of the weekend thanks to the dovish nature of the previous day’s European Central Bank (ECB) meeting minutes. With the central bank looking set to maintain a dovish bias for the foreseeable future investors saw little incentive to buy back into the single currency. Even a weaker US Dollar was not enough to shore up EUR exchange rates during Friday’s European session.
Ahead of tomorrow’s German and Eurozone confidence indexes any demand for the Euro could prove short-lived.
US Dollar Softens on Durable Goods Orders Contraction
The tentative suggestion of progress towards a reopening of US-China trade talks saw safe-haven demand ease on Friday, leaving the US Dollar on a weaker footing. Further softening was in store for USD exchange rates after April’s durable goods orders data fell short of forecast, showing a contraction of -2.1% on the month. This raised fresh concerns over the underlying health of the world’s largest economy, denting the appeal of the US Dollar.
Unless market risk aversion picks up again today the potential for a USD exchange rate rally looks set to remain limited.
Modest Oil Price Recovery Not Enough to Boost Canadian Dollar
While oil prices staged a recovery during Friday’s European session this was not enough to reverse the week’s sharp declines, leaving Brent crude trending in the region of US$66. As a result, the Canadian Dollar was left on the back foot ahead of the weekend as worries over rising US production continue to weigh on the market outlook.
If oil continues to recover ground over the course of the day, however, this may give investors some incentive to favour CAD exchange rates.
Narrowed Trade Surplus Fails to Limit New Zealand Dollar Appeal
Although the New Zealand trade surplus narrowed from 824 million to 433 million in April this decline was smaller than forecast. This encouraged the New Zealand Dollar to trend higher, driven by a solid month of export volumes. While confidence in the outlook of the New Zealand economy as a whole is still muted the data was enough to give NZD exchange rates a temporary boost.
As anticipation mounts for the upcoming Reserve Bank of New Zealand (RBNZ) Financial Stability Report support for the New Zealand Dollar could fade.
Data Releases
May 28th 09:30 AUD ANZ Roy Morgan Weekly Consumer Confidence Index