Australian Dollar Rallies on Unexpected Trade Surplus Widening

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  • Unexpectedly Improved Australian Trade Benefits AUD Exchange Rates – Weaker Chinese trade could dent Australian Dollar today
  • Euro Slumps as ECB Rules Out 2019 Interest Rate Hike – ECB’s dovish policy shift leaves single currency on weaker footing
  • Rising UK House Price Index Fails to Encourage Pound – Lack of progress over Brexit continues to limit GBP exchange rates
  • US Dollar Stalls Ahead of Non-Farm Payrolls Report – Forecasts point towards improved unemployment rate

Widened Trade Surplus Shores up Australian Dollar

A surprise widening of the Australian trade surplus offered the Australian Dollar a rallying point, defying forecasts of a decline in trading conditions. As the Australian economy shrugged off global trade worries in January this gave investors greater cause for confidence, in spite of Wednesday’s weak gross domestic product data. AUD exchange rates also found support on the back of a modest uptick in retail sales, which suggests that domestic sentiment is picking back up.

Even so, if Chinese trade data disappoints this morning the mood towards the Australian Dollar could sour once again.

House Price Improvement Fails to Boost Pound

While the Halifax house price index bettered expectations in February this was not enough to shore up GBP exchange rates last night. Despite the UK housing market showing fresh signs of resilience, with prices surging 5.9% on the month, demand for the Pound still deteriorated. Investors were more concerned by the persistent lack of progress in Brexit discussions, with the issue of the Irish border remaining unresolved.

In the absence of any domestic data the Pound looks set to lose further ground today as long as worries over Brexit persist.

Dovish ECB Drives Euro Lower

Investors were encouraged to pile out of the Euro overnight as the European Central Bank (ECB) shifted its policy outlook. As the central bank altered its forward guidance to rule out the prospect of a 2019 interest rates hike the mood towards the single currency soured significantly. The ECB also downgraded its growth forecasts, suggesting that growth will clock in at 1.1% rather than 1.7% in 2019. All in all, this cautious message left EUR exchange rates on a downtrend.

Another contraction in German factory orders may prompt further losses for the Euro this evening.

US Dollar Softens Ahead of Non-Farm Payrolls Report

A mixed set of jobless claims data limited the strength of the US Dollar last night, even though the labour market continued to show signs of tightening. USD exchange rate momentum proved limited as investors adopted positions in anticipation of tonight’s non-farm payrolls report. Even as the Euro slumped this was not enough to give the US Dollar a significant boost against its rivals.

However, if February’s unemployment rate improves as forecast this could give the US Dollar a solid rallying point heading into the weekend.

Canadian Dollar Shrugs Off Building Permits Contraction

While Canadian building permits contracted further than forecast in January this was not enough to keep CAD exchange rates on a downtrend. This latest sign of weakness within the Canadian housing sector was overshadowed by a positive day of oil trading. As markets remain hopeful that global oil supply will prove limited in the months ahead the mood towards the commodity-correlated Canadian Dollar naturally improved.

Tonight’s employment data could see CAD exchange rates return to a downtrend, however, if the labour market fails to show signs of tightening.

Risk Appetite Supports Australian Dollar

Support for the New Zealand Dollar proved limited yesterday as confidence in the domestic outlook remained lacking. Even so, the better-than-expected Australian trade data offered some support to NZD exchange rates as the general sense of market risk appetite improved.

This morning’s fourth quarter manufacturing activity index may give the New Zealand Dollar a leg up, provided that the sector demonstrates signs of resilience.

Data Releases

March 8th 08:45    NZD    Manufacturing Activity (4Q)    
March 8th 00:30    CAD    Unemployment Rate (FEB)    5.8%
March 8th 00:30    USD    Unemployment Rate (FEB)    3.9%

Post by TorFX

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