Euro Slides as European Central Bank Affirms Dovish Outlook

Australian Dollar (AUD) Looks for Support on Manufacturing PMI

The Australian Dollar (AUD) faltered yesterday in the absence of any fresh domestic data releases.

With market risk appetite weakening again, there was little room for the ‘Aussie’ to make any gains against its rivals. Anxiety over the Covid-19 situation and increasing political tensions with China both added to the weakness of AUD exchange rates, with investors seeing reason to doubt the economic outlook.

Even so, if April’s manufacturing PMI remains firmly in expansion territory, this may limit the potential for further Australian Dollar losses today.

Pound (GBP) Slips as CBI Industrial Trends Index Misses Forecast

The Pound (GBP) softened across the board in response to a surprise dip in the CBI industrial trends orders index.

While forecasts had pointed towards the index rising to 2, returning to positive territory for the first time in over a year, the figure instead dipped to -8. This suggests that economic expectations in the UK dipped at the start of the second quarter, leaving the Pound vulnerable to a fresh bout of selling pressure.

On the other hand, a positive showing from March’s retail sales data could offer the Pound a rallying point ahead of the weekend.

Euro (EUR) Dragged Down as ECB Maintains Dovish Outlook

The Euro (EUR) remained lacking in support in the wake of the European Central Bank’s (ECB) April policy announcement.

As ECB President Christine Lagarde indicated that it is still too soon to consider removing any monetary support, the single currency was left on a weaker footing. With the central bank looking set to maintain its current dovish stance for the foreseeable future, having expressed anxiety over the economic outlook, the downside bias of EUR exchange rates increased.

However, the mood towards the Euro could see some improvement this evening as long as April’s flash Eurozone manufacturing PMI continues to show solid growth.

US Dollar (USD) Strengthens as Initial Jobless Claims Fall

The US Dollar (USD) benefitted from last week’s better-than-expected initial jobless claims figure yesterday, indicating a fall to 547,000 new claims which fell from last week’s reading and below the rise forecast.

USD exchange rates also received support from a rise in US Treasury yields and increased safe-haven demand as market sentiment soured amid concerns over rapidly increasing global coronavirus cases.

A strong showing from tonight’s manufacturing PMI may help the US Dollar to extend its positive run.

Canadian Dollar (CAD) Holds onto Boost from BoC Optimism

The Canadian Dollar (CAD) continued to trend higher even as the latest new housing price index failed to meet expectations.

While growth in new house prices was not quite as strong as previously hoped, this was not enough to knock CAD exchange rates off their uptrend. In the wake of the Bank of Canada’s (BOC) optimistic policy announcement there appeared little reason to sell out of the Canadian Dollar for the time being.

However, another negative month for the wholesale sales index could put a dampener on the Canadian Dollar heading into the weekend.

New Zealand Dollar (NZD) Under Pressure amid Risk Aversion

The New Zealand Dollar (NZD) fell out of favour with investors in the face of the latest bout of market risk aversion.

In the absence of any fresh New Zealand economic data releases, the ‘Kiwi’ was exposed to increased downside pressure. As worries over the health of the global economy and the ongoing Covid-19 crisis persisted, this weighed on the risk-sensitive New Zealand Dollar.

Without an improvement in market sentiment NZD exchange rates look set to remain biased to the downside in the near term.

Data Releases

09:00 AUD Manufacturing PMI (Apr) 56
16:00 GBP Retail Sales (Mar) 1.5%
16:30 GBP Services PMI (Apr) 59
16:30 GBP Manufacturing PMI (Apr) 59
18:00 EUR Eurozone Manufacturing PMI (Apr) 62
18:00 EUR Services PMI (Apr) 49.1
22:30 CAD Wholesale Sales (Mar)
23:45 USD Manufacturing PMI (Apr) 60.5

Louisa Heath