Australian Dollar (AUD) Buoyed by Jump in Business Confidence
The Australian Dollar (AUD) climbed against its peers on Tuesday as the National Australia Bank (NAB)’s business confidence index surprised to the upside.
The index increased to a five month-high of 16 in March 2022, driven by strong consumer demand. According to NAB Chief economist Alan Oster:
‘Businesses reported very strong trading conditions and a sharp rise in profitability, which indicates demand is continuing to hold up as the economy rebounds.’
Into today, ‘Aussie’ trading may be influenced by April’s Westpac consumer confidence index; if consumer morale declines as expected, AUD tailwinds may come to an end.
New Zealand Dollar (NZD) Continues to Firm on RBNZ Expectations
The New Zealand Dollar (NZD) extended its upward trajectory yesterday, supported by AUD upside, as investors anticipated today’s interest rate decision.
The Reserve Bank of New Zealand (RBNZ) was widely expected to hike rates by at least 25bps – traders hoped that a 50bps rate hike could be on the cards for the most hawkish G10 bank.
If the central bank raises interest by only 0.25%, overzealous markets may be disappointed, causing a downturn in the ‘Kiwi’.
Pound (GBP) Receives Mixed Support Following Jobs Report
The Pound (GBP) faced some resistance on Tuesday as a mixed UK jobs report weighed upon Sterling sentiment.
While February’s unemployment rate fell as expected, regular pay only rose 4% over the last 12 months, shrinking by 1% on an inflation-adjusted basis. Moreover, the number of people in work in the UK increased by only 10K rather than the 50K forecast.
UK inflation is likely to influence GBP exchange rates today: if the CPI prints at 6.7% as expected, investors spirits may be buoyed by hopes of more aggressive policy tightening from the Bank of England (BoE).
Euro (EUR) Sinks on ZEW Economic Sentiment
The Euro (EUR) weakened yesterday as economic sentiment in the Euro area fell to -43 in April.
Germany’s ZEW index also dipped to -41 from -39.3 in March, reigniting fears of stagflation in the bloc’s largest economy. The single currency tumbled against its peers on comments that ‘experts are pessimistic about the current economic situation and assume that it will continue to deteriorate.’
A lack of data leaves EUR to trade on risk sentiment and US Dollar (USD) dynamics today. If morale deteriorates further in Ukraine, the single currency could plummet.
US Dollar (USD) Dented by Eye-Watering Inflation
The US Dollar tripped lower against its peers on Tuesday as annual US inflation data printed at a 40-year high of 8.5%.
Given the Federal Reserve’s already-hawkish stance, investors were less than enthusiastic regarding March’s reading. Soaring gas prices were the main driver of inflation – the gasoline index rose 18.3% last month – although prices also rose for rent and food.
Today’s Producer Prince Index is also expected to have risen in March, confirming widespread price pressures for businesses as well as consumers. If the PPI comes in above forecast, the ‘Greenback’ may weaken further.
Canadian Dollar (CAD) Ahead of Interest Rate Decision
The Canadian Dollar (CAD) traded in a mixed range yesterday as markets anticipated an interest rate hike from the Bank of Canada (BoC).
Canada’s central bank is expected to hike interest to 1%, with such a move likely to inspire bullish CAD trading ahead.
Data Releases
Apr 13th 10:30 AUD Westpac Consumer Confidence Index (Apr) 95
Apr 13th 11:00 NZD RBNZ Interest Rate Decision 1.25%
Apr 13th 16:00 GBP Inflation Rate (Mar) 6.7%
Apr 13th 22:30 USD PPI (Mar) 10.6%
Apr 14th 00:00 CAD BoC Interest Rate Decision 1%