Australian Dollar Weakens After Chinese Interest Rate Cut

Chinese Interest Rate Cut Fails to Benefit Australian Dollar

After the People’s Bank of China (PBOC) opted to cut interest rates at the start of the week the mood towards the Australian Dollar soured. With central banks and governments around the world still grappling with the fallout of the Covid-19 crisis a general sense of risk-aversion hung over markets, keeping AUD exchange rates on the back foot.

However, an uptick in February’s private sector credit figure could offer the Australian Dollar a temporary rallying point this morning.

Pound Struggles to Capitalise on Mortgage Approvals Figures

Although February’s UK mortgage approvals figures showed a solid improvement on the month this only offered limited support to the Pound last night. Given the government’s recent advice for people to hold off on moving house while isolation measures are in place the housing market looks set to come under renewed pressure in the months ahead. Even so, the Pound was still able to make gains against some of its weaker rivals.

If the GfK consumer confidence index slips deeper into contraction territory as forecast this may see the Pound fall out of favour.

Weakening Eurozone Confidence Weighs on Euro

March’s Eurozone consumer confidence index weakened sharply from 103.4 to 94.5 on the month, highlighting the challenges facing the currency union. The Euro came under significant selling pressure in the wake of the data, even though investors had anticipated a decline. As the German consumer price index also faltered this left EUR exchange rates lacking in support overnight.

An uptick in the latest German unemployment rate reading may add to the downside bias of the Euro this evening.

US Dollar Shakes Off Plunge in Manufacturing Index

As the global policy response to the Covid-19 crisis continued to step up the US Dollar benefitted from a lingering sense of market risk aversion. This helped to overshadow an unexpectedly sharp plunge in the Dallas Fed manufacturing index, which dropped to -70 in March. Although the world’s largest economy still looks set to suffer a significant slowdown in the first quarter USD exchange rates held onto a generally positive footing.

Another sharp decline from the Chicago purchasing managers index could see the US Dollar lose some of its bullishness, however.

Canadian Dollar Struggles as Oil Prices Remain in Freefall

Oil prices continued to crumble yesterday, with Brent crude recording a -9% drop on the day’s opening levels during the European session. With the Saudi Arabia-Russia price war looking set to drag on fears of global stockpiles running out of space kept prices in freefall. This weighed heavily on the commodity-correlated Canadian Dollar, especially in the face of wider risk aversion.

Any evidence of a slowdown in January’s gross domestic product data may drag CAD exchange rates lower across the board.

New Zealand Dollar Braces for Weaker Activity Outlook Index

As market risk appetite remained generally lacking at the start of the week, with Covid-19 fears still dominating the outlook, support for the New Zealand Dollar proved limited. Even so, NZD exchange rates were able to find some traction thanks to the relative weakness of some of the other majors.

With forecasts pointing towards a major drop in the ANZ activity outlook index the mood towards the New Zealand Dollar looks set to sour further this morning.

Data Releases

March 31st 09:01 GBP GfK Consumer Confidence Index (MAR) -15
March 31st 10:00 NZD ANZ Activity Outlook (MAR) -24.1
March 31st 10:30 AUD Private Sector Credit (YoY) (FEB) 2.6%
March 31st 17:55 EUR German Unemployment Rate (MAR) 5.1%
March 31st 22:30 CAD Gross Domestic Product (MoM) (JAN) 0.1%
March 31st 23:45 USD Chicago PMI (MAR) 40

Louisa Heath