Australian Dollar Slumps as US Trade Outlook Improves

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Headlines

  • ‘Aussie’ slumps on Trump pick for economic advisor – Markets judge Larry Kudlow to be a moderate pick, improving US trade outlook
  • AUD/GBP slides as markets buy weak Pound – Sterling an attractive buy for speculators thanks to recent six-week low
  • AUD/EUR weakens despite poor Euro form – Solid US data weakens Australian Dollar more than Euro
  • US Dollar bullish on Kudlow appointment and jobs data – Jobless claims figures come close to February’s 48-year low

Australian Dollar

The Australian Dollar was on weak form yesterday, despite rising consumer inflation expectations. The latest measure of household’s outlook for long-term price growth rose from 3.6% to 3.7%, but strong data from the US and the belief that President Donald Trump’s pick for economic advisor held a glimmer of hope for the survival of free-trade saw AUD demand slump. This was because markets were less-inclined to believe more tariffs were on the way that would damage the US economy.

Reserve Bank of Australia (RBA) official Guy Debelle will give a speech today.

Sterling

The AUD/GBP exchange rate slumped yesterday, with investors seeing further opportunity to buy Sterling cheap after it hit a six-week low against the Australian Dollar earlier this week. An attractive price was a much bigger influence for markets than a lack of UK data or the fact that consumer goods giant Unilever had announced it would declare its offices in Rotterdam, the Netherlands, as its headquarters, rather than its premises in London.

Euro

The AUD/EUR exchange rate fell yesterday, although the Euro itself was on poor form versus many of its peers. With no economic data on the calendar, markets were awaiting US figures, which printed strongly and weakened the high-risk Australian Dollar more than the stable Euro by driving up USD demand.

Unless finalised Eurozone consumer price index figures prove worse or better-than-expected today, markets may be more interested in the fourth-quarter labour costs figure. If labour costs have grown, this would suggest higher wages, which in turn would improve the inflationary outlook.

US Dollar

The US Dollar received a strong boost yesterday from positive economic data – which showed that jobless claims recently fell back towards a 48-year low – and market relief that Donald Trump’s pick for his new economic advisor wasn’t as fiercely protectionist as some of the other candidates. Larry Kudlow had some strong words for China, but also claimed he was not in favour of blanket tariffs and that he didn’t believe ‘you should punish your friends to try and punish your enemies in international affairs’.

The University of Michigan sentiment index for March is set for release at midnight tomorrow.

Canadian Dollar

The AUD/CAD exchange rate floated around opening levels yesterday, with the Canadian Dollar also weighed down by the latest strong US data. Canadian existing home sales data showed a slowing decline from -14.5% month-on-month in February to -6.5% - hardly supportive, but a better result nonetheless.

Canadian manufacturing sales data is set for release this evening.

New Zealand Dollar

The Australian Dollar leapt higher versus the New Zealand Dollar yesterday after New Zealand’s latest GDP figures disappointed. A slowdown in diary production due to hot weather kept quarter-on-quarter growth steady at 0.6% against forecasts of an uptick to 0.8%. This meant year-on-year GDP only accelerated from 2.7% to 2.9%, disappointing forecasts for 3.1% growth. However, the New Zealand Dollar gradually recovered losses during the course of the day’s trading.

New Zealand’s BusinessNZ manufacturing PMI will be released shortly.

Data Released

March 16th 07.30 NZD BusinessNZ Manufacturing PMI (Feb)
March 16th 08.45 AUD RBA's Debelle Gives Speech in Sydney
March 16th 20.00 EUR Eurozone Labour Costs (YoY) (4Q)
March 16th 22.30 CAD Manufacturing Sales (MoM) (Jan) -0.9%
March 16th 00.00 USD University of Michigan Sentiment (Mar P) 99.3

Post by TorFX

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