Chinese PMI Rebound Unable to Lift Australian Dollar Demand

Recovering Chinese PMIs Unable to Boost Australian Dollar

An unexpectedly sharp rebound in March’s Chinese manufacturing and services PMI was not enough to prevent the Australian Dollar coming under fresh pressure yesterday. Even though both PMIs returned to expansion territory in the final month of the first quarter investors remained unconvinced by the recovery. Until harder data adds to evidence that the world’s second largest economy is returning to normal a sense of risk aversion is likely to limit the potential for AUD exchange rate gains.

The release of the Reserve Bank of Australia’s (RBA) most recent set of meeting minutes could see the Australian Dollar fall further out of favour today.

Pound Pushes Higher Ahead of Manufacturing PMI

Confirmation that the UK gross domestic product stalled in the fourth quarter left investors with little cause for confidence in the outlook of the UK economy. Even so, the mood towards the Pound still picked up overnight thanks to a better-than-expected narrowing of the fourth quarter current account deficit. As this suggests that the UK’s fiscal position is stronger than previously thought this helped to boost GBP exchange rates.

Any downside revision to March’s finalised UK manufacturing PMI may prompt the Pound to trend lower across the board, however.

Euro Muted in Spite of Smaller Uptick in German Unemployment

Germany’s latest unemployment figures surprised markets, showing a much smaller uptick on the month than anticipated. However, as the data was largely collected before lockdown conditions brought the economy to a standstill this struggled to give the Euro any particular boost against its rivals. Softer Eurozone inflation data also limited the appeal of the single currency.

March’s finalised set of Eurozone manufacturing PMIs could keep EUR exchange rates on a weaker footing, as long as the data continues to point towards a sharp slowdown.

Stronger Sentiment Indexes Lift US Dollar

Both the Chicago purchasing managers index and CB consumer confidence index came in stronger than forecast last night, offering the US Dollar a fresh boost. As the surveys suggest that sentiment within the world’s largest economy is holding up in the face of the Covid-19 crisis this kept USD exchange rates on bullish form. A persistent lack of market risk appetite added to the appeal of the safe-haven US Dollar.

A weaker ISM manufacturing index reading may put a dent in USD exchange rates, though.

Steady GDP Fails to Shore up Canadian Dollar

Although January’s Canadian gross domestic product data offered no surprises this failed to prevent CAD exchange rates shedding fresh ground. Oil markets showed some signs of stabilisation overnight, though, thanks to reports of a call between the US and Russian leaders. Hopes of a potential easing in the ongoing Saudi Arabia price war helped to put a floor under oil prices, relieving the Canadian Dollar of some of its downside pressure.

However, a slump from the Canadian manufacturing PMI could still cast a fresh shadow over CAD exchange rates tonight.

Plunge in Business Confidence Weighs on New Zealand Dollar

Demand for the New Zealand Dollar weakened in the wake of March’s ANZ business confidence index. As sentiment saw a sharp plunge on the month, dragging the index from -19.4 to -63.5, worries over the outlook of the New Zealand economy picked back up. Muted market reaction to the Chinese PMIs also limited the traction of NZD exchange rates.

In the absence of fresh domestic data the New Zealand Dollar may struggle to find any major support in the near term.

Data Releases

April 1st 10:30 AUD Reserve Bank of Australia Meeting Minutes
April 1st 17:55 EUR Germany Manufacturing PMI (MAR F) 45.5
April 1st 18:30 GBP Manufacturing PMI (MAR F) 47
April 1st 23:30 CAD Manufacturing PMI (MAR) 47
April 2nd 00:00 USD ISM Manufacturing Index (MAR) 45

Louisa Heath