Australian Dollar Dragged Down as Global Covid-19 Anxiety Rises

Australian Dollar (AUD) Dented by Growing Global Growth Anxiety

The Australian Dollar (AUD) fell further out of favour with investors in the face of the latest bout of market risk aversion.

Growing doubts over the prospect of an imminent global economic rebound left the ‘Aussie’ trending lower against many of the majors yesterday. As Covid-19 cases saw sharp increases in Europe and India, this poured cold water on markets, with the disruption in global trade looking set to continue for some months to come.

Even so, the mood towards the Australian Dollar could see some improvement this morning if the domestic manufacturing PMI remains strong as forecast.

Pound (GBP) Under Pressure in Spite of Lower UK Unemployment Rate

The Pound (GBP) remained under pressure even as the UK unemployment rate saw a surprise improvement in January, falling to 5% rather than rising as anticipated.

While signs point towards the economy having weathered the current national lockdown better than expected so far, growing tensions between the UK and EU over the Covid-19 vaccine supply dragged GBP exchange rates lower.

Demand for the Pound may pick up this evening, though, as markets expect to see March’s services PMI return to a state of positive growth.

Euro (EUR) Limited as Eurozone Covid-19 Infections Rise

The Euro (EUR) saw a mixed performance during the European session in the face of the Eurozone’s handling of Covid-19 vaccines and social restrictions.

In the wake of news of rising infections across the bloc and the imposition of fresh lockdown conditions, the appeal of the single currency proved limited. With the Eurozone economy looking set to remain on the back foot for some time to come, given the prolonged nature of the disruption from Covid-19, EUR exchange rates saw little upside traction.

With the Eurozone service sector looking set to deliver another underwhelming performance, the single currency could shed fresh ground tonight.

US Dollar (USD) Boosted by Risk-Off Trade

The US Dollar (USD) benefitted from its safe-haven status amid a global risk-off mood during yesterday’s session.

Demand for the safe-haven US Dollar improved in the face of growing investor caution over the latest spikes in coronavirus infections around the world, rising tensions between the West and China, and new lockdown restrictions in the EU.

However, a slowdown in durable goods orders growth may limit the US Dollar’s potential to push higher overnight.

Canadian Dollar (CAD) Strengthens in Spite of Oil Price Decline

The Canadian Dollar (CAD) held onto a largely positive footing even as oil prices saw a sharp decline over the course of the day.

While the prospect of extended lockdown conditions in mainland Europe weighed heavily on the oil market, this was not enough to drag the Canadian Dollar lower across the board. Even with market risk appetite diminishing, CAD exchange rates were able to capitalise on the relative weakness of several of the other majors.

A positive month of manufacturing sales growth could offer the Canadian Dollar further encouragement.

New Zealand Dollar (NZD) Plunges Following Housing Market News

The risk-sensitive New Zealand Dollar (NZD) slumped sharply amid a global risk-off mood and as the New Zealand government took action to dampen the buoyant New Zealand housing market by removing incentives for investors.

The attempt by the government to cool the New Zealand housing market appears to have increased the likelihood of the Reserve Bank of New Zealand (RBNZ) holding interest rates lower for longer, causing NZD exchange rates to plummet.

NZD exchange rates could recover some ground this morning if February’s trade balance returns to a state of surplus.

Data Releases

08:45 NZD Balance of Trade (Feb) NZ$400 million
09:00 AUD Manufacturing PMI (Mar) 56.2
20:00 EUR Eurozone Services PMI (Mar) 46
20:30 GBP Services PMI (Mar) 51
23:30 CAD Manufacturing Sales (Feb)
23:30 USD Durable Goods Orders (Feb) 0.8%

Louisa Heath