Australian Dollar Bounces Back as RBA Remains on Hold

Lack of RBA Action Supports Australian Dollar Gains

Demand for the Australian Dollar picked up in the wake of the Reserve Bank of Australia’s (RBA) April policy meeting. It came as little surprise to markets that policymakers opted to leave interest rates on hold at their record low of 0.25%. As the RBA continues to assess the impact of its quantitative easing programme this could provoke AUD exchange rate volatility in the months ahead, however.

A solid month of home loans growth could offer additional support to the Australian Dollar, provided that the general mood of markets remains bullish today.

Boris Johnson’s Hospitalisation Drags Down Pound

News the Boris Johnson had been transferred to intensive care spooked the Pound, driving GBP exchange rates lower across the board. Although subsequent reports suggest that his condition is stable the prospect of political upheaval still weighed heavily on the Pound throughout last night’s European session. An underwhelming fourth quarter labour productivity reading also put pressure on GBP exchange rates.

Ahead of tomorrow’s UK gross domestic product report the Pound could struggle to find any particular degree of support against its rivals.

Surprise Uptick in German Industrial Production Boosts Euro

German industrial production surpassed expectations in February, delivering an unexpected 0.3% growth on the month. As production avoided falling into a state of contraction this offered a boost to the Euro, even though March’s figure is likely to prove rather weaker thanks to the impact of Covid-19. A smaller-than-expected narrowing of the French trade deficit failed to put a dampener on the single currency, meanwhile.

Without the support of fresh Eurozone data EUR exchange rates could face selling pressure in the near term unless a greater sense of political unity appears to emerge between member states.

Deteriorating Small Business Confidence Puts Fresh Pressure on US Dollar

March’s NFIB small business optimism index dropped from 104.5 to 96.4 on the month, highlighting the fallout of the current economic shutdown. This weaker showing helped to put pressure on the US Dollar overnight, aided by a general improvement in market risk appetite. Another sharp increase in the JOLTs job opening index for February gave investors further incentive to sell out of the US Dollar.

As anticipation builds ahead of the release of the Federal Open Market Committee’s (FOMC) most recent set of meeting minutes the mood towards the US Dollar could remain bearish.

Canadian Dollar Benefits as Oil Prices Climb 2.5%

Hopes that the upcoming OPEC+ meeting could still lead to a reduction in global oil production saw prices recover 2.5% during the European session. This offered the Canadian Dollar a leg up against its rivals, diminishing the impact of March’s Ivey PMI. While the index plunged from 54.1 to 26 on the month, representing a sharp contraction, this was not enough to drag on CAD exchange rates at this juncture.

A sharp decline in building permits for February could see the Canadian Dollar return to a weaker footing tonight.

Easing Covid-19 Fears Encourage New Zealand Dollar Gains

With markets still betting that the Covid-19 pandemic is starting to peak in Europe the New Zealand Dollar continued to benefit from an increased sense of risk appetite. Although it remains to be seen how quickly the global economy can recover from the impact of the outbreak investors still took an optimistic view for the time being.

With fresh New Zealand economic data lacking this week NZD exchange rates look set to remain driven by developments in market sentiment.

Data Releases

April 8th 11:30 AUD Home Loans (MoM) (FEB) 4.2%
April 8th 22:30 CAD Building Permits (MoM) (FEB) -3.5%
April 9th 04:00 USD Federal Open Market Committee Meeting Minutes

Louisa Heath