Australian Dollar Benefits from Consumer Confidence Uptick
An uptick in the ANZ Roy Morgan weekly consumer confidence index offered a fresh boost to the Australian Dollar yesterday, pointing towards a continued improvement in domestic sentiment. The mood of AUD exchange rates improved further on the back of a sharp improvement in the price of iron ore, which remains one of Australia’s major exports. With the price of the base metal bouncing back in spite of ongoing global trade tensions the antipodean currency extended its uptrend.
Without the release of any fresh domestic data today, though, AUD exchange rates remain vulnerable to any renewed market jitters.
Political Anxiety Keeps Pound Under Pressure
Confidence in the Pound remained limited in the wake of the European Parliament election results, which saw both Labour and the Conservative Party suffer a severe knockback. As support for the two main UK parties crumbled investors remained wary of the prospect of the Conservative leadership going to a hard-line Brexiteer. With the UK still at significant risk of leaving the EU without a deal markets continue to lack reason to favour GBP exchange rates.
As long as a sense of political anxiety continues to hang over the UK any support for the Pound looks set to prove limited.
Higher Economic Confidence Fails to Boost Euro
Although May’s Eurozone economic confidence index showed a solid improvement on the month this was not enough to shore up EUR exchange rates last night. As the German GfK consumer confidence index unexpectedly deteriorated, showing a fresh decline in sentiment within the Eurozone’s powerhouse economy, this limited demand for the single currency. With markets waiting to see who will succeed Mario Draghi as President of the European Central Bank (ECB) the Euro proved lacking in any particular traction.
With the German unemployment rate expected to hold steady in May the potential for a EUR exchange rate rally appears limited this afternoon.
Consumer Confidence Surge Limits US Dollar Downside
The US consumer confidence index surprised to the upside in May, surging from 129.2 to 134.1 on the month. This strong showing helped to bolster the appeal of the US Dollar overnight, suggesting that consumers are still largely shrugging off the impact of the ongoing US-China trade dispute. However, USD exchange rates failed to return to a bullish trend after the Dallas Fed manufacturing index saw a surprise contraction, pointing towards a further loss of momentum within the manufacturing sector.
Another weak reading from tonight’s Richmond Fed manufacturing index could see USD exchange rates shedding further ground.
Oil Price Weakness Continues to Limit Canadian Dollar Strength
As Brent crude prices continued to trend lower this kept CAD exchange rates on the back foot, with the outlook for the oil market remaining bearish. Even though global supply showed signs of tightening this was not enough to prevent the commodity-correlated Canadian Dollar slipping. Growing investor anticipation ahead of tonight’s Bank of Canada (BOC) interest rate decision added to the softness of CAD exchange rates.
While the BOC is expected to leave interest rates on hold at its May meeting any policy surprises could provoke significant volatility for the Canadian Dollar.
RBNZ Financial Stability Report Set to Dent New Zealand Dollar
The New Zealand Dollar made some tentative gains at the start of the week, even in the absence of any fresh domestic data. With market anxiety over global trade tensions temporarily easing the downside pressure on NZD exchange rates was limited. Even so, ahead of the Reserve Bank of New Zealand’s (RNBZ) Financial Stability Report support for the New Zealand Dollar proved muted.
Fresh signs of RBNZ dovishness could weigh heavily on NZD exchange rates today, with investors still assessing the odds of a potential interest rate cut.
Data Releases
May 29th 09:00 NZ Reserve Bank of New Zealand Governor News Conference on Financial Stability Report
May 29th 17:55 EUR German Unemployment Rate (MAY) 4.9%
May 30th 00:00 CAD Bank of Canada Rate Decision 1.75%
May 30th 00:00 USD Richmond Fed Manufacturing Index (MAY) 6