Euro Weakens as German Business Confidence Misses Forecast

Australian Dollar (AUD) Benefits from Increased Global Confidence

The Australian Dollar (AUD) rallied sharply at the start of the week thanks to a general improvement in market sentiment, helping to shore up the ‘Aussie’ against its less risk-sensitive rivals.

Even in the absence of any fresh domestic data AUD exchange rates push higher across the board, capitalising on hopes of a stronger imminent recovery from the pandemic.

Mounting anticipation ahead of Wednesday’s first quarter inflation data could put something of a dampener on the Australian Dollar in the near term.

Pound (GBP) Muted in Spite of Sense of Economic Optimism

The Pound (GBP) struggled to capitalise on market optimism during Monday’s European session.

While investors continued to bet on the prospect of the UK economy bouncing back in the second quarter, this was not enough to give the Pound a boost. The potential for GBP exchange rate gains proved limited for the time being, even as progress towards an exit from the national lockdown continued.

However, if the CBI distributive trades index jumps as sharply as forecast in April, the Pound is likely to trend sharply higher across the board.

Euro (EUR) Weakens as German Business Expectations Falls

The Euro (EUR) faltered yesterday thanks to a surprise decline in April’s German IFO business expectations index.

Investors had expected to see a modest uptick in the index on the month, leaving the single currency on the back foot when it instead dipped from 100.3 to 99.5. With German businesses showing limited confidence in the economic outlook, the appeal of the Euro naturally diminished, especially as the accompanying business climate index also fell short of forecast.

This underwhelming showing could keep the Euro under pressure over the course of the day, particularly if increased market risk appetite persists.

US Dollar (USD) Falters on Durable Goods Orders Miss

The US Dollar (USD) lost some support as March’s durable goods orders figure failed to show as strong an increase as anticipated.

Orders only experienced growth of 0.5% on the month in March, falling significantly short of the 2.5% increase that markets had expected to see. This put the US Dollar under some pressure at the start of the week, with the lower increase suggesting that the economy did not end the first quarter on quite such a strong footing as expected.

With the upcoming Federal Reserve policy meeting likely to reinforce the bank’s recent dovish tone, the US Dollar may struggle to find traction in the days ahead.

Canadian Dollar (CAD) Upside Limited as Oil Prices Slide

The Canadian Dollar (CAD) saw a mixed performance thanks to a decline in global oil prices on Monday.

While the general sense of market risk appetite picked up, CAD exchange rates still came under pressure during yesterday’s European session. As Brent crude prices weakened on the day’s opening levels, this limited the appeal of the commodity-correlated Canadian Dollar, with doubts over the future of the oil market still lingering.

Without the support of fresh Canadian economic data releases, the potential for fresh Canadian Dollar gains appears limited today.

New Zealand Dollar (NZD) Supported by Risk Appetite

The New Zealand Dollar (NZD) saw some support yesterday as the mood of global markets generally improved.

The potential for fresh ‘Kiwi’ gains proved a little limited, however, as some doubts over the strength of the New Zealand economic outlook persisted. This limited the New Zealand Dollar’s ability to push higher against some of its fellow risk-sensitive rivals, even as investors piled back into higher-yielding assets.

With no New Zealand data set for release today, NZD exchange rates are expected to remain at the mercy of market trends.

Data Releases

20:00 GBP CBI Distributive Trades Index (Apr) 15
00:00 USD CB Consumer Confidence Index (Apr) 113

Louisa Heath