Australian Dollar (AUD) Limited as Retail Sales Slump
The Australian Dollar (AUD) saw limited demand ahead of the weekend thanks to a negative retail sales performance.
While forecasts had pointed towards a modest uptick on the month, February’s sales data instead showed a sharp -1.1% decline, suggesting that consumer spending weakened. Coupled with a general deterioration in market risk appetite, this left the ‘Aussie’ on a softer footing against its rivals, with investors favouring safe-haven assets once again.
If markets see any fresh cause for concern over the outlook of the Chinese economy, this could further limit the appeal of the Australian Dollar.
Pound (GBP) Trends Lower in Spite of Consumer Confidence Uptick
The Pound (GBP) softened on Friday in spite of a better-than-expected performance from March’s GfK consumer confidence index.
Although the index picked up from -23 to -16 on the month, pointing towards a general improvement in domestic sentiment, GBP exchange rates failed to receive a boost. Focus instead fell on the disappointing nature of February’s public sector net borrowing figure, as government debt mounted sharply over the course of the month.
Anticipation ahead of the release of February’s unemployment rate tomorrow could keep the Pound on a softer footing in the near term.
Euro (EUR) Struggles to Capitalise on Rising German Producer Price Index
The Euro (EUR) saw limited demand even as Germany’s producer price index data picked up in February.
Even with signs pointing towards growing inflationary pressure within the Eurozone’s powerhouse economy, the single currency struggled to find much in the way of traction against many of the majors. With confidence in the outlook of the Eurozone economy still distinctly limited, markets failed to find much reason to favour the Euro over its rivals.
A sharp narrowing of January’s Eurozone current account surplus could see EUR exchange rates trending lower this evening.
US Dollar (USD) Holds Strong as Global Growth Doubts Linger
The US Dollar (USD) remained on a positive footing even in the absence of any fresh US data releases ahead of the weekend.
USD exchange rates continued to dominate as market risk appetite remained limited, supporting safe-haven demand for the US Dollar. The resilience of recent US manufacturing data also helped to keep the US Dollar on an uptrend, as well as the relative weakness of the Euro.
If the Chicago Fed national activity index picks up on the month as forecast, this may help the US Dollar to hold onto its strength.
Canadian Dollar (CAD) Downside Limited by Smaller Retail Sales Contraction
The Canadian Dollar (CAD) benefitted from a smaller-than-expected decline in retail sales, limiting its downside potential.
As retail sales only contracted -1.1% on the month in January, as opposed to the -3% decline forecast, this kept a floor under CAD exchange rates. Although signs still point towards a deterioration in domestic sentiment, this was not enough to drag the Canadian Dollar lower.
Softening oil prices could put greater pressure on the Canadian Dollar in the days ahead, especially if the general sense of market risk aversion persists.
New Zealand Dollar (NZD) Muted amid Risk Aversion
The New Zealand Dollar (NZD) remained muted thanks to the lingering impact of the negative fourth quarter GDP report.
With investors still seeing little cause for confidence in the outlook of the New Zealand economy NZD exchange rates were left largely on the back foot. A strengthening US Dollar and reduced market risk sentiment added to the bearish mood in the absence of any fresh domestic data releases.
Unless market confidence recovers in the near term, the ‘Kiwi’ looks set to maintain some degree of weakness.
Data Releases
20:00 EUR Eurozone Current Account (Jan) €22 billion
23:30 USD Chicago Fed National Activity Index (Feb) 0.78