US Dollar Slumps as Non-Farm Payrolls Dramatically Drop

Australian Dollar (AUD) Strengthens Ahead of Business Confidence Index

The Australian Dollar (AUD) benefitted as the Reserve Bank of Australia (RBA) expressed fresh reluctance over the possibility of tightening monetary policy.

Even with housing prices rising sharply, the central bank reaffirmed its willingness to keep interest rates on hold in order to continue supporting the jobs market. Demand for the ‘Aussie’ picked up further during Friday’s European session in the wake of an unexpectedly weak US labour market report.

With the NAB business confidence index expected to pick up in April the appeal of the Australian Dollar could strengthen further.

Pound (GBP) Steady Following BoE Policy Decision

The Pound (GBP) stabilised at the end of the week and recovered some of its losses after the Bank of England (BoE) struck a more cautious than expected tone in its policy decision during Thursday’s European session.

GBP exchange rates received support from the Conservative Party’s by-election win in Hartlepool, which hints at political stability that markets usually favour.

However, as the results of the Scottish parliament election become clear, an SNP majority could renew political uncertainty with calls for Scottish independence.

Euro (EUR) Bolstered as German Trade Surplus Widens

The Euro (EUR) rallied thanks to the unexpected widening of the latest German trade surplus figure ahead of the weekend.

While the trade surplus had been expected to show a modest narrowing in March it instead expanded, indicating that the Eurozone’s powerhouse economy had experienced a greater month of trade activity. With the German industrial production figure also showing a solid increase on the month there was little reason to sell out of the Euro at this stage.

However, without the support of fresh economic data, the single currency may struggle to find any fresh momentum over the course of the day.

US Dollar (USD) Slumps on Unexpectedly Low Non-Farm Payrolls Figure

The US Dollar (USD) dropped across the board heading into the weekend thanks to an unexpectedly weak non-farm payrolls report.

Markets were caught off guard as payrolls saw an increase of just 266,000 in April, as opposed to the jump of 978,000 that had been forecast. This suggests that the labour market experienced a major loss of momentum at the start of the second quarter, a prospect that weighed heavily on demand for the US Dollar and drove it lower against its rivals.

As long as doubts over the health of the US economy linger, this could keep USD exchange rates from staging any particular rally.

Canadian Dollar (CAD) Dented as Unemployment Rate Jumps

The Canadian Dollar (CAD) came under increased pressure as April’s unemployment rate proved higher than anticipated at 8.1%, and up from 7.5% in March.

Coupled with a surprise contraction in April’s average hourly wages data, this left the Canadian Dollar to trend lower across the board on Friday.

Unless market risk appetite continues to pick up, the Canadian Dollar could struggle to find any real demand in the near term.

New Zealand Dollar (NZD) Softens on Weaker Business Inflation Expectations

The New Zealand Dollar (NZD) weakened somewhat in response to a disappointing second quarter business inflation expectations result.

As businesses indicated lower inflation expectations than investors had hoped to see, this left the ‘Kiwi’ lacking in support. Even so, with the general sense of market confidence picking up overnight and weakness in the US Dollar, this helped to keep a floor under NZD exchange rates.

With fresh New Zealand economic data lacking from the calendar for much of the week, though, the New Zealand Dollar could find itself with limited support.

Data Releases

11:30 AUD NAB Business Confidence (Apr) 18

Louisa Heath