Australian Dollar Buoyed by Business Confidence Uptick
A sharp uptick in the NAB business confidence index offered a boost to AUD exchange rates yesterday as the index strengthened from 0 to 7. This suggests that sentiment among Australian businesses improved in May, encouraging hopes that the economy could see a stronger performance in the second quarter. However, the Australian Dollar came under renewed pressure overnight as the US-China trade dispute appeared at fresh risk of flaring up.
Any signs of weakness in June’s Westpac consumer confidence index could also dampen the mood of AUD exchange rates this morning.
Pound Trends Higher on Steady Unemployment Rate
Demand for the Pound picked up last night as the UK unemployment rate held steady at a 44-year low of 3.8% in April. With the domestic labour market still showing signs of tightness the appeal of the Pound naturally improved, even as the accompanying wage data proved more mixed in nature. Although wage growth showed signs of faltering in the face of rising inflation this was not enough to dent GBP exchange rates overnight.
As the Conservative leadership contest continues to unfold, however, this could drag the Pound down again.
Euro Slumps on Investor Confidence Decline
EUR exchange rates stumbled last night after June’s Sentix investor confidence index fell substantially short of forecast. While markets anticipated a moderate decline on the month the slump from 5.3 to -3.3 left markets with little cause for confidence in the single currency. This weaker showing adds to concerns that the Eurozone economy will face a further loss of momentum over the course of the second quarter.
Commentary from European Central Bank (ECB) President Mario Draghi may put additional pressure on the Euro today, assuming he maintains a more dovish outlook.
Surprise Business Optimism Improvement Boosts US Dollar
The US Dollar benefitted from a surprise improvement in May’s NFIB small business optimism index overnight. As the index unexpectedly strengthened from 103.5 to 105.0 this encouraged hopes that the US economy is managing to shrug off some of the impact of ongoing trade tensions and uncertainty. However, USD exchange rates lost a degree of support once the Trump administration threatened the imposition of further tariffs on Chinese imports.
If the latest consumer price index data eases as forecast tonight this could give the US Dollar a fresh boost, with the odds of an imminent Federal Reserve interest rate cut increasing.
Oil Price Boost Benefits Canadian Dollar
A modest recovery in oil prices was not enough to shore up the Canadian Dollar yesterday, even as markets continued to bet on the prospect of an extended OPEC supply cut. CAD exchange rates lost traction in the face of a stronger US Dollar and the threat of another escalation in global trade tensions. Although oil market optimism offered support to the Canadian Dollar investors still saw little incentive to favour the risk-sensitive currency last night.
Any increase in US crude oil inventories may weigh heavily on the appeal of the Canadian Dollar.
New Zealand Dollar Fails to Capitalise on Manufacturing Activity Recovery
While New Zealand manufacturing activity bounced back in the first quarter the strength of NZD exchange rates proved limited yesterday. Although this uptick in activity suggests greater resilience within the New Zealand economy the positive impact on the New Zealand Dollar was muted. Focus instead fell on the latest ANZ truckometer reading, which showed a weaker level of inflationary pressure in May.
Unless retail card spending shows an improvement in May NZD exchange rates look vulnerable to further losses this morning.
Data Releases
June 12th 08:45 NZD Retail Card Spending (MoM) (MAY) 0.5%
June 12th 10:30 AUD Westpac Consumer Confidence (JUN) 0.5%
June 12th 18:15 EUR European Central Bank President Draghi Speaks
June 12th 22:30 USD Consumer Price Index (YoY) (MAY) 1.9%