Australian Dollar (AUD) Slips on Underwhelming Westpac Leading Index
The Australian Dollar (AUD) fell out of favour yesterday thanks to the disappointing nature of the latest Westpac leading index report.
While the index still showed a modest improvement on the month, investors were caught off guard by the downward revision of January’s index, which was lowered from 0.3% to -0.1%. This negative reading suggests that the Australian economy started the year on the back foot, undermining previous confidence in the outlook and leaving the ‘Aussie’ under pressure.
Even so, with the unemployment rate forecast to dip from 6.4% to 6.3% in February, the mood towards the Australian Dollar could improve this morning.
Pound (GBP) Softens as Anticipation for BoE Meeting Mounts
The Pound (GBP) remained on a softer footing against its rivals as anticipation for the Bank of England (BoE) policy meeting continued to mount.
In the absence of any fresh UK data releases, investors found little incentive to buy back into the Pound at this stage, especially given lingering UK-EU tensions. With confidence in the outlook of the economy proving limited, in spite of the ongoing rollout of Covid-19 vaccines, GBP exchange rates struggled.
If the Bank of England proves less cautious in its policy announcement, however, this could offer the Pound a rallying point.
Euro (EUR) Uptrend Continues in Spite of Construction Output Slump
The Euro (EUR) held onto an uptrend even as January’s Eurozone construction output fell short of forecast, plunging -1.9% on the month in January.
Confirmation that the Eurozone inflation rate remained in positive territory last month also helped to keep a floor under EUR exchange rates last night.
With forecasts pointing towards a narrowing of the Eurozone trade surplus, the mood towards the Euro could sour further.
US Dollar (USD) Holds Ground Ahead of Federal Reserve Policy Announcement
The US Dollar (USD) strengthened in line with US Treasury yields overnight as they climbed to a one-year high ahead of the Federal Reserve’s interest rate decision.
Anticipation ahead of the Federal Reserve’s policy announcement encouraged investors to continue favouring the US Dollar, in spite of the risk of fresh policymaker dovishness.
Another smaller initial jobless claims reading could add to the bearish mood of the US Dollar tonight.
Canadian Dollar (CAD) Softens on Disappointing Inflation Data
The Canadian Dollar (CAD) stumbled as February’s inflation data failed to rise as investors had anticipated.
As the headline inflation rate only picked up to 1.1% on the year, as opposed to 1.3%, this left the Canadian Dollar exposed to selling pressure once again. The monthly inflation offered greater cause for concern, meanwhile, as it showed a slight slowdown which could signal weaker inflationary pressure to come in the near future.
If February’s ADP employment change reading can deliver a major rebound in the wake of January’s decline, this may encourage CAD exchange rates to recover some ground.
New Zealand Dollar (NZD) Trends Lower Ahead of GDP Data
The New Zealand Dollar (NZD) failed to benefit from a narrowing of the fourth quarter current account deficit.
While the data suggests that fiscal conditions improved at the end of 2020, the ‘Kiwi’ remained on the back foot thanks to limited market risk appetite. In the face of the resilient US Dollar there was little room for NZD exchange rates to find any particular traction.
Any major signs of slowdown in the fourth quarter GDP could weigh heavily on the appeal of the New Zealand Dollar this morning.
Data Releases
08:45 NZD Gross Domestic Product (Q4) 0.1%
11:30 AUD Unemployment Rate (Feb) 6.3%
21:00 EUR Eurozone Balance of Trade (Jan) €19.1 billion
23:00 GBP Bank of England Interest Rate Decision 0.1%
23:30 CAD ADP Employment Change (Feb) 190,000
23:30 USD Initial Jobless Claims (06/Mar) 700,000