Australian Dollar Jumps 1% on Hopes of Covid-19 Stabilisation

Easing Covid-19 Anxiety Buoys Australian Dollar

The Australian Dollar started the week on a strong footing, driven sharply higher against many of the majors as a sense of risk appetite swept through markets. With a number of major economies announcing fresh stimulus packages, designed to limit the impact of the Covid-19 crisis, the mood of investors generally improved. Evidence of the infection rate stabilising in Italy also helped to encourage AUD exchange rate gains.

Confirmation that the Reserve Bank of Australia (RBA) has no intention of cutting interest rates into negative territory could offer the Australian Dollar a further boost this afternoon.

Weak Consumer Confidence Limits Pound Appeal

While the Gfk consumer confidence index plunged sharply on the month in March this put renewed pressure on the Pound. The sharp decline in consumer sentiment added to existing worries over the health of the UK economy, suggesting that any recovery could take time. A major decline from the latest UK construction PMI also dragged on demand for the Pound overnight.

Lingering worries over the health of the UK economy may limit the potential for GBP exchange rate gains in the near term.

German Factory Orders Drop Weighs on Euro

Even though German factory orders saw a smaller contraction than anticipated in February the mood towards the Euro still soured. As orders still saw a -1.4% decline on the month confidence in the outlook of the Eurozone’s powerhouse economy remained generally limited. While the Covid-19 infection rate in Italy showed signs of stabilisation this was not enough to offer the Euro any real boost against its rivals.

A monthly drop in German industrial production could add to anxiety over the economic outlook this afternoon, leaving the Euro on a weaker footing.

US Dollar Falters as Safe-Haven Demand Eases

Safe-haven demand showed signs of easing at the start of the week, limiting the appeal of the US Dollar. With markets hopeful that the Covid-19 situation is stabilising USD exchange rates struggled to hold onto their positive momentum. Even so, the US Dollar still benefitted from the relative softness of the Euro thanks to the negative correlation of the EUR/USD exchange rate.

Ahead of the release of the Federal Open Market Committee’s (FOMC) latest set of meeting minutes support for USD exchange rates may prove limited.

Canadian Dollar Shrugs Off Latest Oil Price Decline

Another day of sharp decline for oil prices was not enough to weigh down the Canadian Dollar on Monday. Although the postponement of the OPEC+ production meeting saw Brent crude trending lower the appeal of the commodity-correlated Canadian Dollar still improved. With market risk appetite on the up CAD exchange rates found fresh support.

However, with forecasts pointing towards a decline in March’s Ivey PMI the mood towards the Canadian Dollar could sour tonight as worries over the Canadian outlook pick up.

Improved Market Sentiment Lifts New Zealand Dollar

A temporary easing of market anxiety over Covid-19 allowed the New Zealand Dollar to find renewed traction against its rivals. With market risk aversion easing NZD exchange rates recovered some of their recent losses, in spite of an absence of fresh New Zealand data releases.

This positive mood could fade, however, as the first quarter NZIER business confidence index looks set to show a deeper fall into negative territory.

Data Releases

April 7th 08:00 NZD NZIER Business Confidence Index (Q1) -30
April 7th 14:30 AUD Reserve Bank of Australia Rate Decision 0.25%
April 7th 16:00 EUR German Industrial Production (MoM) (FEB) -0.9%
April 8th 00:00 CAD Ivey Purchasing Managers Index (MAR) 41

Louisa Heath