Australian Dollar (AUD) Lacks Traction Despite Unemployment Rate Recovery
The Australian Dollar (AUD) struggled to find much traction even after February’s unemployment rate dropped further than forecast.
While markets had expected to see some improvement in the strength of the Australian labour market, the unemployment rate’s dip from 6.4% to 5.8% pointed towards a much stronger recovery. Even so, with the US Dollar dominant in the wake of the Federal Reserve’s March policy meeting, the appeal of the risk-sensitive ‘Aussie’ still proved limited.
A softer month of growth in retail sales may further dent demand for the Australian Dollar ahead of the weekend.
Pound (GBP) Shored Up as Bank of England Upgrades Economic Outlook
The Pound (GBP) found support in the wake of the Bank of England’s (BoE) March policy decision.
Although policymakers made no move to change monetary policy, investors were encouraged by the more upbeat nature of the accompanying comments. As the central bank expressed a greater degree of confidence in UK economy, upgrading its outlook, this helped GBP exchange rates to push higher against many of the majors.
If the GfK consumer confidence index improves as forecast for March, this may give the Pound an additional boost.
Euro (EUR) Under Pressure as Eurozone Trade Surplus Narrows
The Euro (EUR) faltered as the Eurozone’s trade balance saw a sharper narrowing of the surplus than previously anticipated.
As the surplus narrowed from €29.4 billion to just €6.3 billion in January, this highlighted the extent of the trade disruption facing the currency union. With trade conditions looking unlikely to have seen any significant improvement in the following months, the Euro was left on the back foot.
A softening of the German producer price index could see EUR exchange rates extending their losses this evening.
US Dollar (USD) Lifted as Philadelphia Fed Manufacturing Index Surges
The US Dollar (USD) rallied thanks to the Federal Reserve’s latest commentary and a strong manufacturing index performance.
Given the Fed’s signs of greater confidence in the underlying strength of the US economy, the appeal of the US Dollar improved, even with no interest rate rise looking likely for some time to come. USD exchange rates also gained ground in the wake of March’s Philadelphia Fed manufacturing index, which leapt from 23.1 to 51.8 on the month.
With the world’s largest economy showing signs of increased resilience, the US Dollar could hold onto a positive footing over the course of the day.
Canadian Dollar (CAD) Trends Lower on Employment Change Disappointment
The Canadian Dollar (CAD) slipped as February’s ADP employment change figure failed to show a positive improvement on the month.
As the labour market instead showed fresh signs of weakness, with the economy shedding more than 100,000 jobs, worries over the wider outlook weighed on CAD exchange rates. The growing weakness of the labour market could drag the economy down over the course of the first quarter, exposing the Canadian Dollar to further selling pressure.
The mood towards the Canadian Dollar looks set to remain muted tonight with markets anticipating another monthly contraction in retail sales.
New Zealand Dollar (NZD) Slides Thanks to Negative Fourth Quarter GDP
The New Zealand Dollar (NZD) slumped in response to the underwhelming nature of the fourth quarter GDP report.
Even though markets had expected to see the economy lose momentum in the final months of 2020 the extent of the slowdown caught investors off guard, with the quarterly growth rate contracting -1%. This suggests that the New Zealand economy came under far greater pressure than previously thought in the fourth quarter, leaving the ‘Kiwi’ lacking in any particular appeal at this stage.
In the absence of any fresh domestic data releases the New Zealand Dollar looks set to remain biased to the downtrend in the near term.
Data Releases
11:01 GBP GfK Consumer Confidence Index (Mar) -20
11:30 AUD Retail Sales (Feb) 0.4%
18:00 EUR Germany Producer Price Index (Feb) 0.7%
23:30 CAD Retail Sales (Jan) -3%