Euro Benefits from Leap in German Economic Sentiment Index

Australian Dollar (AUD) Sees Limited Gains after Chinese Inflation Miss

The Australian Dollar (AUD) found limited support against its rivals as April’s Chinese inflation rate failed to pick up as far as forecast.

While the headline inflation rate still strengthened, climbing from 0.4% to 0.9%, this was not enough to give the Australian Dollar any particular boost. With market risk appetite relatively muted, AUD exchange rates held onto modest gains yesterday.

However, confirmation of another solid month of building permits growth could offer a stronger boost to the ‘Aussie’ this morning.

Pound (GBP) Stumbles Ahead of UK GDP Report

The Pound (GBP) failed to hold onto a positive footing overnight in the absence of any fresh UK data releases.

Although markets maintained an optimistic outlook on the UK economy, this failed to give GBP exchange rates much room for gains on Tuesday. Growing anticipation for the first quarter GDP report also put a degree of pressure on the Pound, with investors bracing for a negative reading.

As long as the quarterly growth rate meets forecasts for a sharp contraction in the first three months of the year, the Pound looks set to trend lower across the board.

Euro (EUR) Bolstered as German Economic Sentiment Leaps

The Euro (EUR) benefitted as the German ZEW economic sentiment index saw a sharper jump than anticipated on the month.

As May’s economic sentiment index rose from 70.7 to 84.4, this suggests that confidence within the Eurozone’s powerhouse economy continued to grow this month. This encouraged investors to favour the single currency, with hopes of a second quarter growth rebound picking up further in response to the data.

If the finalised April German inflation rate confirms an uptick to 2% as forecast, the mood towards the Euro could improve further.

US Dollar (USD) Struggles ahead of Inflation Data

The US Dollar (USD) continued to struggle last night, with markets still discouraged by the disappointing nature of last week’s poor non-farm payrolls report there appeared little room for USD exchange rates to rally.

Despite a significant selloff in equity markets, the safe-haven US Dollar failed to make gains in the cautious mood as investors await US inflation data.

With forecasts pointing towards a sharp increase in the inflation rate from 2.6% to 3.6%, USD could come under pressure due to the effect it could have on consumer spending as the Fed appears willing to let inflation rise.

Canadian Dollar (CAD) Lacks Traction in Absence of Domestic Data

The Canadian Dollar (CAD) struggled to find any traction as a lack of risk-appetite weighed on markets.

Oil prices saw limited movement over the course of the day, lacking in any fresh momentum to continue pushing higher. With doubts over the strength of the Canadian economy also lingering, CAD exchange rates generally faltered, dented by a lack of market confidence.

Without any fresh Canadian economic data set for release in the near term, the Canadian Dollar looks set to remain primarily influenced by developments in the oil market.

New Zealand Dollar (NZD) Fails to Strengthen on Retail Card Spending Growth

The New Zealand Dollar (NZD) failed to capitalise on a stronger-than-expected month of retail card spending growth.

While spending leapt 4% on the month in April, defying forecasts of a slight loss of momentum, this was not enough to give the ‘Kiwi’ any fresh boost against its rivals yesterday. Even with signs pointing towards a greater degree of consumer confidence at the start of the second quarter the more risk-averse mood left NZD exchange rates on a softer footing.

As long as market sentiment remains bearish the New Zealand Dollar may struggle to return to an uptrend.

Data Releases

11:30 AUD Building Permits (Mar F) 17.4%
16:00 EUR Germany Inflation Rate (Apr F) 2%
16:00 GBP Gross Domestic Product (Q1) -1.6%
22:30 USD Inflation Rate (Apr) 3.6%

Louisa Heath