Australian Dollar Pushes Higher in Defiance of Ratings Downgrade

Australian Dollar Trends Higher Despite Credit Rating Downgrade

Ratings agency S&P’s decision to downgrade the outlook on Australia’s AAA credit rating from stable to negative failed to drag down the Australian Dollar yesterday. Although the report suggests that the economy still faces the significant risk of a Covid-19 downturn this was not enough to offset a general sense of market risk appetite.

The release of the Reserve Bank of Australia’s (RBA) financial stability review could see the Australian Dollar fall out of favour once again, however, as doubts over the economic outlook mount.

Pound Remains Under Pressure on Fears of Political Disruption

While Boris Johnson was reported to still be in stable condition this failed to encourage any particular turnaround for the Pound overnight. As the possibility of greater political disruption remained this kept GBP exchange rates on a weaker footing, bracing against the possibility of a deterioration in Johnson’s condition.

Unless February’s monthly UK gross domestic product reading demonstrates solid growth the Pound could struggle to find any particular support tonight.

Lack of Eurozone Shared Debt Agreement Fuels Euro Losses

As Eurozone officials failed to reach an agreement over a proposed shared debt plan this left the Euro under pressure. With Dutch politicians opposing the introduction of so-called ‘coronabonds’ tensions within the currency union showed fresh signs of escalation. An increasing divide between Italy and its northern neighbours looks set to cast a shadow over the future of the Eurozone as a whole.

However, a widened German trade surplus for February could still help to keep a floor under EUR exchange rates this evening.

US Dollar Under Pressure Ahead of Latest Jobless Claims Figures

Support for the US Dollar proved relatively muted as markets braced for the release of the latest set of Federal Open Market Committee (FOMC) meeting minutes. With investors wary of the potential for policymakers to demonstrate fresh signs of dovishness USD exchange rates struggled to hold onto their previous bearish form.

Further volatility could be in store for the US Dollar if tonight’s initial jobless claims figure shows another major increase in unemployment on the week.

Surge in Saudi Arabian Oil Output Drags on Canadian Dollar

The Canadian construction sector showed fresh signs of weakness in February as building permits saw a -7.3% decline on the month. With worries over the health of the Canadian economy mounting investors were spooked by the latest developments in the oil market. Reports of a surge in Saudi Arabian oil tankers heading to the US suggested that the price war is still far from over, leaving the commodity-correlated Canadian Dollar on a downtrend.

The mood towards the Canadian Dollar could sour further overnight if March’s unemployment rate leaps from 5.6% to 7.2% as forecast.

New Zealand Dollar Gains Ground in Spite of WTO Trade Warning

Even though the World Trade Organisation warned that global trade could see a slump as deep as that of the Great Depression this failed to knock the New Zealand Dollar. Hopes that containment efforts in New Zealand are paying off, limiting the spread of Covid-19, helped to shore up NZD exchange rates. While it remains to be seen how soon a return to normal will come this offered a boost to the risk-sensitive currency.

Any deterioration in market sentiment may still weigh heavily on the New Zealand Dollar today.

Data Releases

April 9th 11:30 AUD Reserve Bank of Australia Financial Stability Review
April 9th 16:00 EUR German Balance of Trade (FEB) 16.5 billion
April 9th 16:00 GBP Gross Domestic Product (MoM) (FEB) 0.1%
April 9th 22:30 CAD Unemployment Rate (MAR) 7.4%
April 9th 22:30 USD Initial Jobless Claims (APR 4) 5.2 million

Louisa Heath