Australian dollar (AUD) bolstered by trade optimism
The Australian dollar (AUD) opened this week’s session on positive footing amid a significant de-escalation of trade tensions between the US and China.
Given Australia’s close economic ties to China, particularly through commodity exports, the developments were seen as a positive signal for the Australian economy.
The ‘Aussie’ may maintain a positive trajectory this morning if this optimism is reflected in domestic consumer and business confidence data.
New Zealand dollar (NZD) firms in risk-on trade
The New Zealand dollar (NZD) also rallied on Monday amid the positive shift in market risk appetite.
If this optimism extends into today’s session, the ‘kiwi’ may look to consolidate its gains.
Pound (GBP) slides despite hawkish BoE messaging
The pound (GBP) trended broadly lower through yesterday’s session amid a sharp appreciation of many of its peers.
The drop in Sterling came despite comments from Bank of England (BoE) Deputy Governor for Monetary Policy, Clare Lombardelli, suggesting that a cautious approach to future interest rate cuts remains appropriate.
The UK will publish its latest jobs report later this afternoon. Expect the pound to falter if UK unemployment rose and wage growth slowed as forecast in March.
Euro (EUR) pressured by risk-on flows
The euro (EUR) proved to be one of the worst-performing major currencies on Monday, as investors, by and large, shunned safe-haven assets.
Compounding these losses was the single currency’s negative correlation with the US dollar (USD), which proved the primary beneficiary of yesterday’s rally.
Coming up, the euro may be able to mount a comeback today, if Germany’s latest ZEW economic sentiment index reports morale recovered this month.
US dollar (USD) soars on US-China trade agreement
The US dollar got off to a roaring start this week, following the news that the US and China had agreed to a 90-day trade truce, which would see both powers lower their respective tariffs by 115%.
The news was cheered by USD investors amid hopes the de-escalation reduces the risk of a US recession.
The spotlight now turns to the latest US consumer price index. An acceleration of inflation last month will likely validate the Federal Reserve’s recent hawkish tilt, which could extend the US dollar’s bullish momentum.
Canadian dollar (CAD) underpinned by rising oil prices
The Canadian dollar (CAD) drew support from a sharp rise in oil prices on Monday, which helped offset broader concerns about how US trade policy is impacting the Canadian economy.
Movement in the ‘loonie’ will likely remain tied to oil price dynamics today, with CAD exchange rates poised to strengthen if crude prices continue to rally.
Data releases
10:30 AUD Consumer Confidence (May)
11:30 AUD Business Confidence (Apr)
16:00 GBP Unemployment Rate (Mar)
16:00 GBP Wage Growth (Mar)
19:00 EUR German ZEW Economic Sentiment (May)
22:30 USD Inflation Rate (Apr)