Australian Dollar Lifted by Surprise Business Confidence Jump

Australian Dollar (AUD) Strengthens on Business Confidence Uptick

The Australian Dollar (AUD) benefitted from an unexpectedly strong uptick in April’s NAB business confidence index.

While forecasts had pointed towards an improvement in sentiment on the month, investors were still caught off guard by the leap from 17 to 26. This increase suggests that businesses took a more optimistic view at the start of the second quarter, bolstering hopes of a strong quarter of growth to come.

Another positive showing from the HIA new home sales figure could offer some additional support to the ‘Aussie’ this morning.

Pound (GBP) Rallies on Increased Political Stability

The Pound (GBP) surged over 1% against the Euro and US Dollar during yesterday’s European session as investors were relieved that the Scottish National Party (SNP) missed an overall majority that could have given the party a clear mandate for an independence referendum.

GBP exchange rates received further support from Prime Minister Boris Johnson’s announcement that lockdown conditions will ease more in the UK.

However, growing anticipation ahead of the release of the first quarter GDP report may put a dampener on the Pound over the course of the day.

Euro (EUR) Fails to Capitalise on Stronger Investor Confidence

The Euro (EUR) started the week on a generally muted footing even as the Sentix investor confidence index improved.

While the index rose to its highest level since March 2018, jumping from 13.1 to 21 in May, this was not enough to offer the single currency any particular boost. Although signs point towards business confidence starting to recover in the second quarter the risk of further weak growth continued to weigh on EUR exchange rates.

If the German ZEW economic sentiment index rises on the month, however, this could offer the Euro a stronger boost against its rivals.

US Dollar (USD) Lacks Support amid More Upbeat Trade

The US Dollar (USD) remained under pressure as markets continued to digest the impact of Friday’s poor payrolls report.

As the labour market showed such a major loss of momentum in April, with the headline payrolls figure showing a much smaller increase than forecast, the appeal of the US Dollar remained muted. Investors saw little reason to favour the safe-haven currency at this stage, especially in the wake of a general improvement in market risk appetite.

With US inflation data due during Wednesday’s session, USD investors may hold aggressive bets until after the figures are released.

Canadian Dollar (CAD) Falters as Unemployment Data Continues to Weigh on Sentiment

The Canadian Dollar (CAD) saw limited direction against its rivals in the absence of any fresh Canadian economic data.

With CAD exchange rates still dented by Friday’s higher-than-expected unemployment rate, there appeared little potential for a rally at this stage. Although market risk appetite saw some improvement, muted oil prices kept the Canadian Dollar under a degree of pressure against its rivals.

Unless the oil market stages a major uptick, the Canadian Dollar may struggle to find any significant support in the days ahead.

New Zealand Dollar (NZD) Muted in Absence of Domestic Data

The New Zealand Dollar (NZD) made limited gains across the board even as risk appetite held up.

Without the support of any fresh New Zealand data releases, the ‘Kiwi’ struggled to find any fresh headway yesterday. While the weakness of the US Dollar continued to benefit NZD exchange rates this was not enough to drive any major gains.

In the absence of any domestic economic data today the New Zealand Dollar may find itself lacking in direction.

Data Releases

10:00 AUD HIA New Home Sales (Apr) 30%
19:00 EUR Germany ZEW Economic Sentiment Index (May) 72
20:00 USD NFIB Business Optimism Index (Apr) 98.7

Louisa Heath

louisa.heath@torfx.com


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