Australian Dollar (AUD) Buoyed by RBA Outlook, Commodity Dynamics
The Australian Dollar (AUD) strengthened against several peers yesterday despite a risk-off market mood, as investors anticipate that the Reserve Bank of Australia (RBA) will hike interest rates in May.
Further supporting the ‘Aussie’ are comments from a leading metal merchant. The company reassured markets that steel mills [in China] are still operating and buying Australian raw materials following suggestions that China was winding back steel production.
Looking ahead, Australia’s PPI is expected to tally with rising consumer prices today, potentially buoying AUD.
New Zealand Dollar (NZD) Softens as Business Confidence Wanes
The New Zealand Dollar (NZD) weakened on Thursday as business confidence fell according to a report from ANZ bank.
The latest release marked the tenth negative reading in a row, as profit expectations remained under pressure alongside cost forecasts. Inflation expectations hit a record high again, although pricing intentions eased slightly.
A lack of significant data leaves NZD to trade on external factors today, such as Australian Dollar strength and commodity dynamics. If AUD firms, the ‘Kiwi’ may enjoy tailwinds.
Pound (GBP) Subdued by Geopolitical Tensions
The Pound (GBP) sank yesterday as risk-off headwinds pressured the currency. Russia restated its warning against supplying more weapons to Ukraine while claiming to have captured the Ukrainian city of Kherson.
Elsewhere, there are significant doubts over whether the Bank of England (BoE) will pursue any more rate hikes over the summer, given the extent of the UK’s cost-of-living crisis.
Both factors may continue to influence Sterling today, given a lack of domestic economic data. If Russia continues to threaten Ukraine’s allies, GBP could trend lower.
Euro (EUR) Fluctuates despite German CPI Tailwinds
The Euro (EUR) struggled to benefit from a high German inflation reading on Thursday, as risk aversion dampened support for the currency.
Russia’s threats to cut off gas supplies were particularly damaging to EUR sentiment, following its withdrawal of resources from Poland and Bulgaria. In response to the threat, a handful of European countries were reportedly planning to pay for gas in Roubles (RUB).
Today’s GDP data may affect EUR exchange rates, alongside the latest EU inflation reading. If the Euro area CPI increased to 7.5% in April, as expected, the Euro could climb.
US Dollar (USD) Extends Gains on Risk Aversion, Hawkish Fed
The US Dollar (USD) climbed through yesterday’s session as a risk-off mood bolstered the safe-haven currency while hawkish Federal Reserve rate hike projections continued to lend support.
The ‘Greenback’ was subsequently able to shrug off a weaker-than-expected GDP reading: the US economy contracted by 1.4% in Q1 2022 rather than growing by 1.1% as expected. The data suggested that a record trade deficit and a decline in inventory investment were to blame.
The PCE price index is likely to influence USD trading today, as the Fed’s preferred measure of inflation. A rise to 6.8% is expected, following the CPI’s trend and potentially buoying the US Dollar.
Canadian Dollar (CAD) Ticks Up on Energy Supply Concerns
The Canadian Dollar (CAD) enjoyed some upside on Thursday as crude oil prices were supported by the Russia-Ukraine conflict.
Canada’s GDP release could affect the ‘Loonie’ today – if the economy expanded by 0.8% as forecast, CAD may firm.
Data Releases
Apr 29th 11:30 AUD PPI (Q1) 1.6%
Apr 29th 18:00 EUR German GDP Growth Rate Flash (Q1) 0.1%
Apr 29th 19:00 EUR GDP Growth Rate Flash (Q1) 0.3%
Apr 29th 19:00 EUR Inflation Rate Flash (Apr) 7.5%
Apr 29th 22:30 CAD GDP (Feb) 0.8%
Apr 29th 22:30 USD PCE Price Index (Mar) 6.8%
Apr 29th 22:45 USD Chicago PMI (Apr) 62
Apr 30th 00:00 USD Michigan Consumer Sentiment Final (Apr) 65.7