Underwhelming Trade Figures Dent Australian Dollar
As April’s Australian trade data disappointed expectations, showing a modest narrowing of the surplus, the mood towards the Australian Dollar deteriorated further. The decline suggests that the economy was not as insulated from global trade tensions as markets had hoped, adding to worries over the domestic outlook. However, the downside pressure on AUD exchange rates was limited thanks to the high odds investors are now pricing for a Federal Reserve interest rate cut.
Another weak month of home loans growth and investment lending could see the Australian Dollar falter further this morning, though.
Upbeat BoE Report Boosts Pound
The release of the Bank of England’s (BoE) Annual Report offered the Pound some cause for confidence last night, suggesting that the central bank is still taking a fairly positive outlook. As the report suggested that inflation is likely to pick up further ‘if the economy continues to perform as the MPC expects’ the prospect of an interest rate hike remains on the cards. This helped to shore up GBP exchange rates, even though Governor Mark Carney failed to deliver any fresh insight on the potential timing of any policy action.
A similarly upbeat assessment from the latest BoE/TNS inflation attitudes survey could encourage the Pound to make stronger gains across the board.
Euro Losses Limited in Spite of ECB Dovishness
There was little surprise as the European Central Bank (ECB) signalled that it intends to leave interest rates at their current record low for longer. Although President Mario Draghi noted that some policymakers had discussed the possibility of an interest rate cut this was not enough to drive the Euro down. Markets had largely anticipated this shift towards greater dovishness, allowing the single currency to recover some ground overnight.
Another month of contraction in German industrial production could add to the bearish bias of EUR exchange rates, however.
Rising Jobless Claims Weigh on US Dollar
As the US deficit failed to narrow as far as forecast in April USD exchange rates were left on a weaker footing, given that trade conditions are likely to soften further in the months ahead. Investors were further disappointed by an increase in the latest initial and continuing jobless claims figures, lending weight to bets that tonight’s non-farm payrolls report could show a loosening of the labour market. A slowdown in non-farm productivity added to the bearish mood of the US Dollar, meanwhile.
If the non-farm payrolls report shows signs of weakening employment conditions USD exchange rates are likely to see further losses heading into the weekend.
Export Jump Encourages Canadian Dollar Optimism
April’s Canadian trade data offered CAD exchange rates cause for confidence overnight as export volumes unexpectedly picked up on the month. This helped to significantly narrow the trade deficit, encouraging hopes that the Canadian economy could escape the worst impact of escalating global trade tensions. Although oil prices continued to weaken this was not enough to dent the Canadian Dollar at this stage.
Any signs of weakness within the Canadian labour market or slowdown in wage growth could weigh heavily on CAD exchange rates, however.
New Zealand Dollar Softens on Disappointing Commodity Price Index
The ANZ commodity price index proved disappointing yesterday, falling back from 2.3% to 0.0% in May and suggesting fresh weakness in the New Zealand trade outlook. NZD exchange rates slipped in the wake of the data, with markets still seeing a significant chance of the Reserve Bank of New Zealand (RBNZ) cutting interest rates again in the near future.
Without the support of any fresh domestic data today the New Zealand Dollar looks set to remain on a weaker footing.
Data Releases
June 7th 11:30 AUD Home Loans (MoM) (APR) -0.3%
June 7th 16:00 EUR German Industrial Production (YoY) (APR) -0.4%
June 7th 18:30 GBP Bank of England/TNS Inflation Attitudes Survey
June 7th 22:30 CAD Unemployment Rate (MAY) 5.7%
June 7th 22:30 USD Change in Non-Farm Payrolls (MAY) 180,000