US Dollar Appeal Declines on Negative National Activity Index

Australian Dollar (AUD) Muted as Risk Appetite Softens

The Australian Dollar (AUD) found itself lacking in momentum yesterday as the general sense of market risk appetite proved muted.

Even with the US Dollar on a weaker footing, the ‘Aussie’ struggled to gain any fresh traction against its rivals. Without the encouragement of fresh economic data there was little room for AUD exchange rates to make gains at this stage, given lingering pandemic concerns.

Demand for the Australian Dollar is unlikely to see any particular turnaround unless investors find renewed cause for confidence.

Pound (GBP) Lacks Direction Ahead of UK Unemployment Rate

The Pound (GBP) remained on the back foot at the start of the week in the absence of any fresh UK data releases.

Confidence in the economic outlook faltered in spite of the ongoing success of the country’s Covid-19 vaccine rollout, with markets still wary over the potential for further pandemic disruption. Anticipation ahead of the release of the latest set of UK labour market data also helped to keep the Pound under pressure at this stage.

As long as the unemployment rate rises for January as anticipated, the mood towards the Pound is unlikely to see any real improvement in the short term.

Euro (EUR) Steady as the US Dollar Dips

The Euro (EUR) held onto a positive trend during the European session due to its negative correlation with the US Dollar, which weakened as market mood calmed and US Treasury yields pulled back.

EUR exchange rates gained despite the latest current account surplus narrowing from €51.9 billion to just €5.6 billion in January.

Growing anticipation ahead of the release of March’s raft of Eurozone manufacturing and services PMIs could offer the Euro further encouragement.

US Dollar (USD) Dragged Lower by National Activity Index Miss

The US Dollar (USD) lost some of its footing overnight thanks to a surprise decline in the Chicago Fed national activity index.

While forecasts had pointed towards a modest uptick in the index investors were disappointed to find that it had instead dropped from 0.75 to -1.09. This suggests that confidence within the US economy deteriorated at the end of the first quarter, raising fresh doubts over the resilience of the world’s largest economy and leaving the US Dollar on a downtrend.

Even so, if the Richmond Fed manufacturing index rises as expected this evening the mood towards the US Dollar could improve once again.

Canadian Dollar (CAD) Slips as Wholesale Sales Fall

The Canadian Dollar (CAD) faltered in the wake of a contraction in February’s wholesale sales data.

As sales dropped -0.4% on the month this stoked renewed anxiety over the outlook of the Canadian economy, especially in the face of the latest bout of global market jitters. With economic activity looking set to remain under pressure in the near future this left CAD exchange rates exposed to selling pressure.

Comments from Bank of Canada (BOC) policymakers could prompt the Canadian Dollar to shed further ground tonight.

New Zealand Dollar (NZD) Benefits from Small Consumer Confidence Dip

The New Zealand Dollar (NZD) rallied thanks to a stronger-than-expected first quarter Westpac consumer confidence index reading.

Although the index still softened on the quarter the reading of 105.2 proved significantly better than the forecast dip to 98.4. All in all, this suggests that sentiment within the New Zealand economy remains strong even in the face of the ongoing global Covid-19 crisis and offered the ‘Kiwi’ a boost against its rivals.

Even so, another negative month of credit card spending may leave NZD exchange rates biased to the downside today.

Data Releases

13:00 NZD Credit Card Spending (Feb)
18:00 GBP Unemployment Rate (Jan) 5.2%
01:00 USD Richmond Fed Manufacturing Index (Mar) 15

Louisa Heath