Australian Dollar (AUD) Dented by Covid Pressures in China
The Australian Dollar (AUD) tumbled against its peers in midweek trade, as a high number of Covid cases in China led to weaker services data.
China’s Caixin services PMI dropped to 42 in March – below expectations of a smaller fall to 49.3. The disappointing data weighed upon the ‘Aussie’ on account of the two countries’ close trading relationship.
Australia’s trade balance may influence AUD rates today – if the country’s trade surplus softens as expected, the ‘Aussie’ may trend lower.
New Zealand Dollar (NZD) Falls on Weakening AUD
The New Zealand Dollar (NZD) weakened on Wednesday, with the currency falling in sympathy with the Australian Dollar.
A lack of data further exposed the currency to losses, alongside a risk-off market mood: although officials were hopeful that humanitarian corridors may be established in Ukraine, the war rumbled on with reports of Russian brutality denting trading sentiment.
Into today, NZD will likely take cues from risk flows and movement in ‘Aussie’ exchange rates. If risk-off trading prevails, the ‘Kiwi’ could sink lower.
Pound (GBP) Trading Dampened by UK Cost of Living
Despite holding onto gains against several of its peers, the Pound (GBP) faced headwinds yesterday on account of rising National Insurance contributions.
Along with the NI tax increase, Britons are facing surging inflation, rising fuel costs and an increase in the energy price cap. The Unite union criticised the government’s decision to raise taxes, arguing that working people were being unfairly impacted by the NI increase.
External factors will direct Sterling sentiment today, with downbeat updates from Ukraine likely to further damage GBP’s prospects.
Euro (EUR) Buoyed by US Dollar Weakness
The Euro (EUR) faced resistance midweek, as German factory orders missed expectations. Order growth contracted by 2.2% in February, rather than the 0.2% forecast.
The single currency was able to retain upside, however, as weakness in the US Dollar (USD) bolstered EUR due to the currencies’ strong negative correlation. The Euro was also able to shrug off a weaker-than-expected construction PMI shortly afterwards.
German industrial production could affect EUR today, with unchanged activity levels potentially applying downside. An increase in February’s Euro area retail sales may counter headwinds, however.
US Dollar (USD) Subdued by Fears of Recession
The US Dollar was unable to make the most of risk-off upside on Wednesday, as rumours of an economic recession sapped trading sentiment.
Economists at Deutsche Bank were the first to forecast a US recession earlier this week, as markets begin to worry about overly aggressive monetary policy from the Federal Reserve. Adding to concerns, the US Treasury yield curve has inverted during recent trade.
Speeches from the Fed might influence ‘Greenback’ trading today, along with jobs data: if initial jobless claims decreased at the end of last week, as expected, USD could tick back up.
Canadian Dollar (CAD) Weakens on Oil Price Slide
The Canadian Dollar (CAD) fell yesterday as declining crude oil prices dented support for the ‘Loonie’.
CAD may yet benefit, however, from March’s Ivey PMI, which hit 74.2 on Wednesday rather than the 60 forecast.
Data Releases
Apr 7th 11:30 AUD Balance of Trade (Feb) A$12bn
Apr 7th 16:00 EUR German Industrial Production (Feb) 0%
Apr 7th 19:00 EUR Retail Sales (Feb) 0.6%
Apr 7th 22:30 USD Initial Jobless Claims (2/Apr) 200K
Apr 7th 23:00 USD Fed Bullard Speech N/A
Apr 8th 04:00 USD Fed Evans Speech N/A
Apr 8th 04:00 USD Fed Bostic Speech N/A
Apr 8th 06:05 USD Fed Williams Speech N/A