Mixed Chinese Trade Data Limits Australian Dollar Appeal
Confidence in the Australian Dollar was shaken at the start of the week as May’s Chinese trade data proved mixed in nature. Although the headline trade surplus widened further than forecast this failed to offer encouragement to the antipodean currency, in spite of its status as a proxy for the health of the Chinese economy. Investors were more concerned by a sharp contraction in Chinese import values, suggesting that demand for key Australian metal imports has fallen.
Any uptick in the NAB business confidence index could encourage AUD exchange rates to gain some ground this morning.
Weak April Growth Weighs on Pound
Worries over the outlook of the UK economy picked back up last night after April’s monthly UK gross domestic product showed a surprisingly sharp contraction of -0.4%. Although the quarterly growth rate remains on a positive trend this was not enough to overshadow the monthly decline. With growth found to have fallen to its lowest monthly level in three years the Pound was left to trend lower across the board as anxiety over the impact of Brexit-based uncertainty persisted.
A slowdown in UK average weekly earnings may see GBP exchange rates shedding further ground today.
Euro Shakes off Slowing Italian Production
A disappointing showing from Italy’s industrial production figures failed to weigh down the Euro overnight. Even though the continued decline in production suggests that the Italian economy remains under significant pressure in the second quarter investors were quick to shrug off the data. Instead, the single currency benefitted from the relative weakness of many of its rivals at the start of the week as speculation over the global trade outlook continued.
As forecasts point towards a decline in the latest Sentix investor confidence index, though, the appeal of the Euro could weaken once again.
US Dollar Benefits from Latest Trade Developments
With investors having already effectively priced in the impact of the Federal Reserve cutting interest rates before the end of the year the downside pressure on the US Dollar eased. This allowed the USD exchange rates to recover some of their lost ground at the start of the week as the incentive for further selling eased. The US Dollar also strengthened in response to the latest signs of tension over US-Mexico trade, with the Trump administration once again raising the prospect of potential tariffs.
If the NFIB small business optimism index weakens as forecast this evening, though, USD exchange rates could falter.
Surge in Building Permits Supports Canadian Dollar
Canadian building permits saw a significant surge on the month in April, climbing 14.7% even as the number of housing starts fell. This suggests that the domestic construction sector is in a healthier state, limiting the risk of the Bank of Canada (BOC) taking a dovish view on monetary policy in the near future. While oil prices remained under pressure this was not enough to prevent the Canadian Dollar making some gains across the board last night.
As long as the oil market maintains a bearish outlook, however, the potential for further CAD exchange rate strength appears limited.
New Zealand Dollar Softens Ahead of Manufacturing Activity
Investors saw little incentive to favour the New Zealand Dollar yesterday in the absence of any fresh domestic data. As market jitters picked up in response to the latest US trade developments this left NZD exchange rates under pressure. With the New Zealand economy already showing signs of weakness the prospect of a continued slowdown in global trade weighed heavily on NZD sentiment.
This morning’s first quarter manufacturing activity index could drive the New Zealand Dollar lower still, with markets wary of any fresh signs of economic weakness.
Data Releases
June 11th 08:45 NZD Manufacturing Activity (1Q)
June 11th 11:30 AUD NAB Business Confidence (MAY) 1
June 11th 18:30 GBP Average Weekly Earnings (3M/YoY) (APR) 3.0%
June 11th 18:30 EUR Eurozone Sentix Investor Confidence Index (JUN) 2.5
June 11th 20:00 USD NFIB Small Business Optimism (MAY) 101.9