Australian Dollar Reverses Couse as Trade Surplus Narrows

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Headlines

  • Narrowed Trade Surplus Weighed on Australian Dollar Demand – Confidence in domestic outlook diminishes
  • German Factory Orders Showed Surprise -2.5% Slump – Euro falls as hopes of second quarter Eurozone economy rebound fade
  • US Dollar Faltered on Unimpressive Jobless Claims Data – Risk appetite limits demand for lower-yielding USD
  • GBP Exchange Rates Trended Lower on Brexit Jitters – Signs of division remain within Theresa May’s cabinet


Australian Dollar

April’s Australian trade data failed to keep the Australian Dollar on a stronger footing yesterday as the surplus narrowed further than forecast. This undermined some of the recent market optimism over the outlook of the Australian economy, indicating that trade pressures remain. As the latest construction PMI also pointed towards a loss of momentum within the sector the mood of AUD exchange rates naturally soured.

In the absence of any domestic data the Australian Dollar could struggle to find any particular support ahead of the weekend.

Sterling

The Halifax house price index for May proved disappointing, with growth in house prices found to have eased from 2.2% to 1.9% on the year in the three months to May. A general sense of Brexit-based uncertainty also limited the appeal of the Pound on Thursday, with markets speculating over the possible departure of Brexit secretary David Davis. Although Davis did not resign as suspected this still highlighted the lingering tensions within Theresa May’s cabinet.

Further pressure could be in store for Sterling today if the Bank of England (BoE)/TNS inflation attitudes survey suggests that price pressure are likely to fall further over the coming months.

Euro

German factory orders surprised to the downside in April, unexpectedly slumping -2.5% on the month. The weaker showing exacerbated fears over the outlook of the Eurozone’s powerhouse economy, suggesting that the second quarter will not see the rebound in growth that investors have hoped for. Even so, the Euro remained on a positive footing against many of the majors yesterday thanks to bets on the prospect of a more hawkish European Central Bank (ECB) policy meeting.

A narrowing of the German trade surplus could set EUR exchange rates on a fresh downtrend, however.

US Dollar

Demand for the US Dollar remained generally limited overnight as investors saw little reason to favour the safe-haven currency over its higher-yielding rivals. The latest jobless claims figures did little to improve the appeal of the US Dollar, with a rise in continuing claims offsetting a modest dip in initial claims. With worries over the global trade outlook easing, at least for the time being, USD exchange rates continued to trend lower.

With no major US data scheduled for release today USD exchange rates do not look likely to find a rallying point in the short term.

Canadian Dollar

CAD exchange rates found some limited support on the back of a solid improvement in oil prices. Venezuela’s continuing troubles encouraged Brent crude to break back above US$76 per barrel yesterday. Even so, as US production remains elevated and investors started to brace for today’s Canadian unemployment data the Canadian Dollar remained under a degree of pressure against its rivals.

If the labour market shows fresh signs of tightening this may encourage the Canadian Dollar to return to a stronger footing.

New Zealand Dollar

Even with New Zealand data lacking from the calendar NZD exchange rates were able to capitalise on improved market sentiment on Thursday. With the general sense of risk aversion easing demand for the New Zealand Dollar picked up, especially in the wake of the latest US Dollar weakness. Although concerns over the future of global trade remain this was not enough to limit NZD.

Unless market sentiment sours today the New Zealand Dollar should hold onto a relatively positive footing.


Data Released

June 8th 16:00 EUR German Trade Balance (APR) 20.2 billion
June 8th 18:30 GBP BoE/TNS Inflation Attitudes Survey (MAY) 
June 8th 22:30 CAD Unemployment Rate (MAY) 5.8%

Post by TorFX

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