China Lockdown Comments Buoy the ‘Aussie’

Australian Dollar (AUD) Bolstered by Upbeat Comments from China

The Australian Dollar (AUD) enjoyed an upside at the end of last week as the deputy mayor of Shanghai, Wu Qingat, said the city will aim to open up by mid-May.

AUD sentiment had been dented over the course of the week as economic growth in China was threatened by the spread of Covid-19. Therefore, this upbeat news supported the ‘Aussie’ Dollar.

Into today, Chinese retail data may dent the ‘Aussie’. If sales fell by 6.1% between April 2021 and 2022, as expected, AUD could sink due to its role as a proxy for the Chinese economy.

New Zealand Dollar (NZD) Stages Slight Rebound

The New Zealand Dollar (NZD) weakened against several peers on Friday, before rebounding slightly on rocky US Dollar trading.

As US consumer confidence plummeted, economists speculated whether risk assets may be benefit from a ‘bad news is good news’ mindset as markets price in a less restrictive Federal Reserve.

Looking ahead, NZD may trade down today on a lack of significant data from New Zealand.

Pound (GBP) Dips on Ongoing Recession Worries

The Pound (GBP) came under pressure at the end of the week as economists warned that the chances of a UK recession had risen amidst weak GDP forecasts.

Furthermore, tensions increased over the Northern Ireland protocol, as the UK appeared close to unilaterally scrapping parts of the agreement. Amid hard-line rhetoric from some UK government ministers, GBP investors fear a souring of UK-EU trade relations.

A lack of data leaves Sterling to trade on external factors today – if market sentiment is upbeat, GBP may find support.

Euro (EUR) Declines on Falling Industrial Production

The Euro (EUR) traded in a mixed range on Friday, benefitting from risk-on trading sentiment but dented nonetheless by weakening industrial production.

Industrial production in the Euro area fell by 1.8% in March – the biggest fall in nearly two years. According to Eurostat, this was on account of the war in Ukraine.

Germany’s wholesale prices could affect the single currency today, alongside the Eurozone’s trade balance. If the latter jumps to a €19.8bn surplus, as expected, EUR could gain against its peers.

US Dollar (USD) Faces Improving Market Mood

The US Dollar (USD) came against some resistance at the end of the week as positive risk flows limited safe-haven support for the ‘Greenback’.

Michigan consumer sentiment also missed expectations, causing USD to slip slightly, but Fed rate hike bets continued acting as a tailwind and prevented serious losses.

If the NY Empire State manufacturing index falls on Monday to 14.5, as forecast, the US Dollar could encounter headwinds.

Canadian Dollar (CAD) Firms on Oil Prices

The Canadian Dollar (CAD) rose on Friday as oil prices climbed. Crude prices edged higher for the third consecutive day, underpinning support for the commodity-linked ‘Loonie’.

Data Releases

May 16th 16:00 EUR German Wholesale Prices (Apr) 1.9%
May 16th 19:00 EUR Balance of Trade (Mar) €19.8bn
May 16th 22:30 USD NY Empire State Manufacturing Index (May) 14.5

 

Mathew Andrews

mathew.andrews@torfx.com


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