AUD Exchange Rates Dented by Inflation Rate Miss

Australian Dollar (AUD) Stumbles on Inflation Rate Miss

The Australian Dollar (AUD) softened as the first quarter inflation rate failed to pick up as far as forecast, rising on the year 1.1% rather than the forecast 1.4%.

The quarterly inflation data also put pressure on AUD exchange rates as it showed a surprise easing in inflationary pressure in the first three months of the year. This limited bets on the prospect of greater Reserve Bank of Australia (RBA) hawkishness to come, leaving the ‘Aussie’ under pressure.

With forecasts pointing towards a softening in export price growth, the mood towards the Australian Dollar may remain muted today.

Pound (GBP) Pressured as Impact of Economic Optimism Fades

The Pound (GBP) remained under pressure during Wednesday’s European session as optimism over the retail sector recovery faded.

In the absence of any fresh domestic data, there appeared little reason for investors to favour the Pound over its rivals, especially as high odds of a second quarter recovery have already been priced in.

Even though the UK economy still appears on track to regain its lost momentum, the potential for GBP exchange rate gains looks to remain limited through the rest of this week, with domestic politics potentially driving movement as the Scottish parliament elections draw nearer.

Euro (EUR) Pushed Lower as German Consumer Confidence Falls

The Euro (EUR) came under pressure as May’s German GfK consumer confidence index unexpectedly fell.

Forecasts had suggested a modest improvement in consumer confidence on the month, instead the index dipped from -6.1 to -8.8. This latest evidence of growing anxiety within the Eurozone’s powerhouse economy dragged EUR exchange rates lower, with investors still wary of the potential for a fresh economic slowdown.

Even so, if the headline German inflation rate picks up in April as anticipated, this could offer the Euro a boost against its rivals.

US Dollar (USD) Softens Thanks to Widening Goods Trade Deficit

The US Dollar (USD) faltered yesterday in response to a widening of the March advance goods trade balance deficit.

USD exchange rates biased to the downside when the figure showed a widening instead of narrowing slightly as forecast.

However, the mood towards the US Dollar could well improve this evening as long as the first quarter GDP strengthens as expected.

Canadian Dollar (CAD) Bolstered as Retail Sales Rebound

The Canadian Dollar (CAD) found support as February’s retail sales data showed a stronger rebound than expected.

With sales showing a 4.8% increase in the month, reversing January’s -1.1% decline, confidence in the health of the wider Canadian economy picked up. Evidence of a recovery in consumer spending and sentiment helped to push the Canadian Dollar higher against many of the majors, particularly in the face of increasing market optimism.

Another positive showing from the latest average weekly earnings figure may offer an additional leg up to CAD exchange rates.

New Zealand Dollar (NZD) Pushes Higher Ahead of Trade Figures

The New Zealand Dollar (NZD) benefitted from an increase in market confidence and the weakening US Dollar.

As investors were encouraged to pile into higher-yielding assets again, the appeal of the New Zealand Dollar picked up. With markets taking a more positive outlook and safe-haven demand diminishing in the face of weaker US data, NZD exchange rates were able to find traction.

Support for the ‘Kiwi’ could strengthen further this morning as long as March’s trade data shows a widening surplus.

Data Releases

08:45 NZD Balance of Trade (Mar) NZ$210 million
11:30 AUD Export Prices (Q1) 0.9%
22:00 EUR Germany Inflation Rate (Apr) 1.9%
22:30 CAD Average Weekly Earnings (Feb)
22:30 USD GDP (Q1) 6.1%

Louisa Heath