Australian Dollar Pushes Higher as Chinese Trade Surplus Swells

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  • Australian Dollar Trends Higher as Widening Chinese Trade Surplus Boosts Confidence – RBA expresses concern over increasing economic risks
  • Euro Strengthens as Eurozone Industrial Production Beats Forecast – Trade tensions with US continue to mount
  • Surprise Dip in Consumer Confidence Weighs Down US Dollar – Risk appetite also limits safe-haven demand
  • Weaker Manufacturing PMI Fails to Drive New Zealand Dollar Down – Markets look for stronger service sector performance

Widened Chinese Trade Surplus Benefits Australian Dollar

An unexpectedly sharp widening of the Chinese trade surplus encouraged the Australian Dollar to trend higher heading into the weekend. Market risk appetite generally picked up in the wake of the trade data, with AUD exchange rates also taking encouragement from an increase in Chinese iron ore imports. This helped to diminish the impact of the Reserve Bank of Australia’s (RBA) latest Financial Stability Report, even though policymakers highlighted a number of increasing risks facing the economy.

If risk sentiment sours once again today, however, this could leave the Australian Dollar exposed to renewed selling pressure.

Brexit Anxiety Keeps Pound on Back Foot

Confidence in the Pound remained generally limited on Friday, with Brexit-based uncertainty weighing on market sentiment once again. Even though the UK avoided crashing out of the EU without a deal last week investors remain concerned by the impact prolonged uncertainty is likely to have on the economy. As MPs showed no signs of moving towards any agreement on Brexit GBP exchange rates struggled to find much in the way of support.

Political jitters could put fresh pressure on the Pound as markets continue to weigh up the likelihood of a potential Conservative leadership challenge or general election.

Euro Rises as Eurozone Industrial Production Betters Forecast

Although Eurozone industrial production continued to contract on both the month and the year in February this failed to weigh down the Euro. As the modest decline of -0.3% on the year bettered forecasts of a -1% drop this offered a boost to the single currency. While confidence in the outlook of the Eurozone economy remains weak this improvement still encouraged EUR exchange rates to trend higher across the board. 

If trade tensions between the EU and US continue to escalate, however, this could see the Euro come under renewed pressure.

Weaker Consumer Confidence Dents US Dollar

With investors in a more risk-positive mood the US Dollar fell out of favour during Friday’s European session as demand for safe-haven assets eased. USD exchange rates saw further losses on the back of April’s University of Michigan consumer confidence index, which showed a surprise decline on the month. As consumers showed signs of increasing caution this month confidence in the economic outlook diminished further.

Even so, as forecasts point towards a solid uptick from the latest Empire manufacturing index this could see the US Dollar rally tonight.

Oil Rally and Risk Appetite Support Canadian Dollar

Oil prices continued to push higher on Friday, benefitting from the general improvement in market risk appetite. Although Chinese imports fell sharply on the month this was not enough to weigh down CAD exchange rates, with investors maintaining an optimistic outlook on the current health of the oil market. Even so, the Canadian Dollar failed to gain any traction against its more bullish rivals ahead of the weekend.

CAD exchange rates remain vulnerable to any deterioration in investor confidence in the near term.

New Zealand Dollar Shrugs Off Disappointing Manufacturing PMI

March’s manufacturing PMI proved disappointing, with the index dropping from 53.4 to 51.9 on the month. While this still showed growth within the sector investors were discouraged by this latest sign of easing economic activity. Nevertheless, NZD exchange rates were quick to shake this underwhelming data off thanks to the latest raft of Chinese trade data and improved market confidence.

As long as the services PMI shows a solid acceleration on the month the mood towards the New Zealand Dollar could improve further this morning.

Data Releases

April 15th 08:30    NZD    Services PMI (MAR)    54.2
April 15th 22:30    USD    Empire Manufacturing Index (APR)    8.0

Post by TorFX

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