Record Low UK Services PMI Drives Pound Selling

Retail Sales Uptick Unable to Lift Australian Dollar

A positive month of retail sales in February was not enough to keep the Australian Dollar from shedding ground ahead of the weekend. The mood towards the antipodean currency soured in the wake of the latest Chinese services PMI, which remained in contraction territory in spite of a major rebound. With the global economy looking set to slow further in the face of the Covid-19 crisis investors found little incentive to favour the Australian Dollar.

Any softening in the TD Securities inflation gauge may fuel further AUD exchange rate losses this morning.

UK Service Sector Decline Fuels Fresh Pound Losses

As the finalised UK services PMI saw a downward revision the mood towards the Pound soured. The index’s drop from 53.2 to 34.5 took the measure to its lowest level since records began, highlighting the challenge facing the UK economy. With the odds of a larger gross domestic product contraction growing there was little reason to support GBP exchange rates ahead of the weekend.

A similarly underwhelming construction PMI could keep the Pound on the back foot today, in spite of the sector’s more limited contribution to the UK growth rate.

Downgraded Eurozone Services PMIs Weigh Heavily on Euro

Worries over the outlook of the Eurozone economy continued to mount as March’s finalised raft of services PMIs proved weaker than initially thought. All in all, this points towards the currency union experiencing a major recession in the first half of 2020 as the impact of the Covid-19 crisis bites. Even so, the Euro only saw limited downside pressure on the back of the data thanks to the relative weakness of many of the other majors.

With forecasts pointing towards a sharp monthly decline in German factory orders, though, the Euro looks vulnerable to a fresh bout of weakness.

Weaker-Than-Expected Payrolls Fail to Drive US Dollar Lower

March’s US non-farm payrolls report proved weaker than markets had anticipated, revealing a -701,000 decline in the headline figure. This lifted the monthly unemployment rate from 3.5% to 4.4%, a deterioration which could give Federal Reserve policymakers cause for concern. Even so, with markets in a more risk averse mood the US Dollar saw limited losses in response to the labour market data.

As long as a sense of anxiety continues to hang over markets this could keep USD exchange rates biased to the upside.

Second Day of Oil Price Gains Offers Support to Canadian Dollar

After rallying 30% during Thursday’s European session oil prices saw another day of solid gains. While no oil production limiting agreement emerged, with the OPEC+ cartel only announcing a planned meeting for Monday, this still shored up the oil market. With markets hopeful that a further stabilisation in prices could be in store this gave the commodity-correlated Canadian Dollar a boost.

However, if Saudi Arabia and Russia fail to settle their differences and agree to an oil output cut CAD exchange rates may experience another sharp slump,

New Zealand Dollar Braces for Commodity Price Index

Support for the New Zealand Dollar proved limited on Friday thanks to the lingering sense of global market risk aversion. In the absence of any fresh domestic data NZD exchange rates struggled to find much in the way of traction.

Another weak showing from the ANZ commodity price index could add to the bearishness of the New Zealand Dollar this morning, given limited confidence in the domestic outlook.

Data Releases

April 6th 11:00 AUD TD Securities Inflation (YoY) MAR)
April 6th 11:00 NZD ANZ Commodity Price Index (MAR)
April 6th 16:00 EUR German Factory Orders (MoM) (FEB) -2.8%
April 6th 18:30 GBP Construction PMI (MAR) 44

Louisa Heath