Australian Dollar Capitalises on Hopes of US-China Trade Breakthrough

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Headlines

  • Hopes of Progress Towards US-China Trade Agreement Shore up Australian Dollar – US delays deadline for increase to Chinese tariffs
  • Odds of No-Deal Brexit Rise as Theresa May Postpones Vote – Pound trends lower as Brexit uncertainty persists
  • New Zealand Dollar Benefits as NZ Retail Sales Surge – Stronger consumer spending boosts NZD exchange rates
  • Oil Price Slump Dents Canadian Dollar Demand – CAD exchange rates fail to benefit from market risk appetite



Delay to US Tariffs on Chinese Products Boosts Australian Dollar

Market risk appetite improved as the US delayed the deadline for an increase in tariffs on Chinese goods, shoring up the Australian Dollar. As hopes of a potential resolution to the US-China trade dispute picked up this encouraged AUD exchange rates to gain ground, given that the Australian Dollar is a common proxy for the Chinese economy. Even so, these gains could prove short-lived if the two sides fail to show concrete progress towards a deal.

An uptick in the ANZ Roy Morgan weekly consumer confidence index could see the Australian Dollar gain further ground this morning, however.

No-Deal Brexit Fears Drag on Pound

News that Theresa May has once again pushed back Parliament’s promised ‘meaningful’ vote on the proposed Brexit deal let the Pound on a weaker footing at the start of the week. With MPs now set to vote on the deal less than two weeks ahead of the Brexit deadline the risk of a no-deal scenario appeared to increase. Even so, rumours of a potential extension to Article 50 helped to limit the losses of GBP exchange rates overnight.

Comments from Bank of England (BoE) Governor Mark Carney could put additional pressure on the Pound this evening.

Euro Lacks Support Ahead of Consumer Confidence Index

Support for the Euro proved limited at the start of the week thanks to the absence of any fresh Eurozone data. With the European Central Bank (ECB) looking set to take a dovish outlook on monetary policy in the months ahead investors have seen little reason to favour the single currency over its rivals. However, the relative weakness of the US Dollar still offered some support to EUR exchange rates.

Any weakening of the German GfK consumer confidence index may see the Euro lose further ground today, especially if comments from ECB policymakers remain dovish.

Weak Chicago National Activity Index Dents US Dollar

A surprisingly sharp decline in January’s Chicago Fed national activity index left the US Dollar on a weaker footing overnight. As the index slumped from 0.27 to -0.43 this undermined confidence in the outlook of the US economy, suggesting that economic momentum remains limited. The general increase in market risk appetite also weighed on the US Dollar, in spite of the positive impact a US-China trade agreement would have on the domestic economy.

The mood of USD exchange rates could sour further if Federal Reserve Chair Jerome Powell takes a dovish tone on monetary policy in his latest comments.

Oil Price Slump Weighs on Canadian Dollar

The latest downtrend in oil prices dragged on the commodity-correlated Canadian Dollar during Monday’s European session. As Trump launched a fresh attack on OPEC’s policies this prompted oil markets to reverse their recent uptrend, even though the criticism is unlikely to shift the bloc’s outlook. Even with investors in a risk-positive mood CAD exchange rates were unable to avoid a fresh decline.

Unless oil prices rebound today the mood towards the Canadian Dollar is unlikely to improve materially.

Strong Retail Sales Boost New Zealand Dollar

NZD exchange rates pushed higher yesterday thanks to an unexpectedly strong increase in retail sales excluding inflation. As sales increased 1.7% on the quarter in the final three months of 2018 this improved confidence in the outlook of the wider New Zealand economy. With markets in a bullish mood there was nothing to stop the New Zealand Dollar gaining fresh ground against its rivals.

However, NZD exchange rates may struggle to hold onto a positive footing today if market sentiment sours once again.


Data Releases

February 26th 09:30    AUD    ANZ Roy Morgan Weekly Consumer Confidence Index    
February 26th 18:00    EUR    German GfK Consumer Confidence Index (MAR)    10.8
February 26th 20:30    GBP    BBA Loans for House Purchase (JAN)    38,400

Post by TorFX

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