Australian Dollar Drops in Spite of RBA Ruling Out Negative Rates

Australian Dollar Slides as RBA Shuns Negative Interest Rates

Even though the Reserve Bank of Australia (RBA) ruled out the possibility of negative interest rates in its latest set of meeting minutes this failed to shore up the Australian Dollar. Focus instead fell on the day’s deterioration in market risk appetite, which drove copper prices more than 2% lower. This decline cast fresh shadow over the outlook of the Australian economy, leaving AUD exchange rates under pressure.

Unless market sentiment sees a major turnaround in the near term the Australian Dollar could remain biased to the downside.

Pound Recovers Ground Thanks to Manufacturing PMI Revision

A slight upward revision to the finalised UK manufacturing PMI helped to limit the downside potential of the Pound last night. While the sector still saw a pronounced slowdown at the end of the first quarter, with signs pointing towards a further deterioration, GBP exchange rates found some renewed traction. The relative weakness of many of the Pound’s rivals also offered a boost as the impact of Covid-19 continued to escalate.

Even so, ahead of the release of the corresponding UK services PMI the mood towards the Pound may still sour again.

Jump in Retail Sales Fails to Shore up Euro

While German retail sales saw an unexpected 1.2% surge on the month in February the Euro remained under pressure. As this uptick is likely to be outweighed by a deterioration in March’s sales data this limited the impact of the data. Confirmation that March’s Eurozone manufacturing PMIs all saw a significant decline also helped to drag the single currency lower against many of the majors.

A negative reading from the Eurozone producer price index could put a fresh dampener on the Euro this evening.

US Dollar Rallies After Smaller Decline in ADP Employment Change

The ADP employment change survey surprised investors with a smaller decline than forecast, encouraging the US Dollar to push higher. However, as the data only takes the first half of March into account this only offered limited reassurance to investors. With safe-haven demand picking up in the face of the latest market anxiety, though, USD exchange rates remained on a stronger footing.

A narrowing of February’s trade deficit may offer a fresh boost to the US Dollar overnight.

Dramatic Drop in Oil Drives Further Canadian Dollar Losses

With analysts predicting an even steeper decline in oil prices as the world rapidly approaches its storage capacity the mood towards the commodity-correlated Canadian Dollar remained muted. Brent crude a fall of nearly -6% during Wednesday’s European session after a sharp increase in US crude oil stockpiles dealt markets a fresh blow. A wider sense of risk aversion added to the bearishness of CAD exchange rates.

Unless tonight’s Canadian trade data can impress the Canadian Dollar looks set to fall further out of favour.

Risk Aversion Limits New Zealand Dollar

Support for the New Zealand Dollar remained fairly muted as worries over the global economic outlook continued to weigh on the minds of investors. With the US Dollar back on a positive footing there was little room for NZD exchange rate gains yesterday.

Without any major shift in market sentiment the New Zealand Dollar could remain lacking in support for the remainder of the week.

Data Releases

April 2nd 19:00 EUR Eurozone Producer Price Index (MoM) (FEB) -0.2%
April 2nd 22:30 CAD Trade Balance (FEB) -1.8 billion
April 2nd 22:30 USD Trade Balance (FEB) -40 billion

Louisa Heath