Australian Dollar Falters vs Pound, US Dollar on Weak Jobs Data

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Headlines

  • Surprise Participation Rate Fall Weighed on AUD Exchange Rates – Confidence dented by underwhelming jobs data
  • UK Retail Sales Contraction Failed to Limit Pound Rebound – GBP reverses recent losses
  • New Zealand Dollar Slumped on Softening NZ Inflation – RBNZ looks set to remain on hold for longer
  • CAD Exchange Rates Benefited as Oil Hit Three-Year High – Further gains forecast on tonight’s inflation data

Australian Dollar

AUD exchange rates came under renewed pressure yesterday as March’s raft of Australian labour market data fell distinctly short of expectations. Investors were not impressed to find that the participation rate had unexpectedly dipped back to 65.5%, indicating that a smaller number of Australians are now active within the job market. Coupled with a sharp decline in full time employment this left the Australian Dollar on a general downtrend.

With no fresh Australian data set for release ahead of the weekend the mood towards the ‘Aussie’ is unlikely to particularly improve in the near term.

Sterling

In a fresh blow to the UK economic outlook March’s retail sales data proved weaker than forecast. This weakness was in part attributable to the severe weather conditions that gripped the country last month, prompting consumers to remain at home rather than brave the shops. As a result, sales contracted -0.5% on the month and are expected to drag on the first quarter gross domestic product. Even so, after its recent bout of weakness the Pound was still able to recover ground during Thursday’s European session.

Commentary from Bank of England (BoE) policymakers could provoke fresh volatility for GBP exchange rates today.

Euro

Although the Eurozone current account surplus was found to have widened sharply in February this was not enough to encourage any particular demand for the Euro. While this indicates that the economy remains in a relatively strong state EUR exchange rates struggled to capitalise on the improvement. A widening of the Eurozone’s trade surplus raises the risk of the US implementing fresh protectionist measures against the currency union.

A stronger showing from March’s German producer price index data may offer the Euro some degree of support, however.

US Dollar

The latest US jobless claims figures fell short of forecast overnight, although signs still point towards the domestic labour market continuing to tighten. As March’s leading index indicated a loss of momentum within the US economy this left the US Dollar lacking in any particular support. Markets also remain jittery over the prospect of a fresh escalation in trade tensions between the US and either Russia or China.

Even so, if Federal Reserve policymakers adopt a more optimistic outlook in upcoming speeches the mood towards the US Dollar could well improve.

Canadian Dollar

Investors reacted positively to the ADP’s March payrolls report, which showed evidence of a sharp uptick in Canadian employment. This added to the generally optimistic mood surrounding the health of the Canadian economy, even in the shadow of NAFTA renegotiations. Bullish oil prices also helped to push CAD exchange rates higher, with Brent crude breaking back above US$74 per barrel to reach its highest level since 2014.

With the Canadian inflation rate forecast to have picked up in March the Canadian Dollar could find an additional boost tonight.

New Zealand Dollar

As the first quarter New Zealand consumer price index eased from 1.6% to 1.1% on the year this prompted NZD exchange rates to slump. With domestic inflationary pressure struggling to pick up the Reserve Bank of New Zealand (RBNZ) looks set to maintain its dovish policy bias for longer. Even with global commodity prices and market risk appetite picking back up the New Zealand Dollar failed to find support.

In the absence of any fresh domestic data the ‘Kiwi’ may struggle to reverse its losses today.

 Data Released

April 20th 16:00 EUR German Producer Price Index (YoY) (MAR) 2.0%
April 20th 22:30 CAD Consumer Price Index (YoY) (MAR) 2.4%
April 20th 00:00 EUR Eurozone Consumer Confidence (APR A) -0.1

Post by TorFX

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