Australian dollar (AUD) steady ahead of RBA rate decision
The Australian dollar (AUD) traded sideways at the start of this week as AUD investors erred on the side of caution ahead of the Reserve Bank of Australia’s (RBA) impending interest rate decision.
Mixed Chinese economic figures also left the ‘Aussie’ directionless on Monday, with industrial production impressing, while retail sales fell short of expectations.
The RBA is widely expected to announce an interest rate cut when it concludes its May policy meeting later today. However, if the bank’s forward guidance remains hawkish, the ‘Aussie’ could still climb.
New Zealand dollar (NZD) muted amid mixed market mood
The New Zealand dollar (NZD) was subdued on Monday amid the fluctuating market mood.
NZD data is in short supply today, likely leaving movement in the ‘kiwi’ to remain tied to market risk dynamics.
Pound (GBP) underpinned by UK-EU deal
The pound (GBP) trended broadly higher through yesterday’s session, following the announcement of a new deal between the UK and EU to lift checks on food, livestock and agricultural products.
The announcement was well received by GBP investors amid hopes it could provide a £9bn boost to the UK economy.
GBP investors will look to a speech by Bank of England (BoE) Chief Economist Huw Pill for fresh impetus today. As one of the more hawkish members of the BoE’s Monetary Policy Committee (MPC) his comments may help to underpin the pound.
Euro (EUR) bolstered by USD weakness
The euro (EUR) rallied on Monday as it was underpinned by its negative correlation with the US dollar (USD).
However, the single currency’s upside potential was ultimately capped after the European Commission slashed its 2025 Eurozone growth forecast in light of increased fragmentation in global trade.
Germany’s latest producer price index may drag on the euro later this afternoon, as producer inflation is predicted to have fallen again in April.
US dollar (USD) slides as US stripped of triple-A credit rating
The US dollar tumbled at the start of this week after Moody’s downgraded its US credit rating from Aaa to Aa1, citing concerns over the growing US national deficit and rising interest costs.
The announcement spooked markets, with a subsequent selloff of US bonds triggering a further rise in US Treasury yields and raising fresh concerns over the cost of US government borrowing.
The hangover from the credit rating downgrade may continue to weigh on the US dollar today, unless we hear something positive regarding trade talks with a US trading partner.
Canadian dollar (CAD) slides as oil prices soften
The Canadian dollar (CAD) weakened on Monday, with the currency coming under pressure amid a softening of oil prices and as a result of its positive correlation with the US dollar.
Canada will publish its latest consumer price index later today. Inflation is forecast to have fallen rapidly in April, which could drag on the ‘loonie’ if CAD investors see this as placing more pressure on the Bank of Canada (BoC) to continue cutting interest rates.
Data releases
14:30 AUD RBA Interest Rate Decision
16:00 EUR German PPI (Apr)
18:00 GBP BoE Pill Speech
22:30 CAD Inflation Rate (Apr)