- Stronger Australian Inflation Could Boost AUD Exchange Rates – Consumer price index forecast to rise to RBA target
- Better-Than-Forecast Eurozone Composite PMI Failed to Boost Euro – Confidence in economic outlook of currency union remains limited
- Canadian Dollar Softened Ahead of BOC Governor Comments – Bullish oil market limits CAD downside
- Rising Bond Yields Shore up US Dollar Exchange Rates – US domestic data continues to impress
Rising US bond yields weighed heavily on the Australian Dollar at the start of the week, with demand for the commodity-correlated currency weakening. Increasing market confidence in the prospect of a more aggressive Federal Reserve policy outlook has limited the appeal of the ‘Aussie’, even as global geopolitical tensions continued to ease. Anticipation ahead of today’s first quarter Australian consumer price index data also kept AUD exchange rates in check.
If inflation does edge higher to 2% on the year, however, this could see the Australian Dollar making fresh gains against its rivals.
Brexit-based jitters saw a resurgence during Monday’s European session as Downing Street reaffirmed its intention to take the UK out of the customs union. With political tensions mounting once again there was little incentive to favour the Pound at this stage. As UK and EU officials appear to be no closer to resolving the contentious issue of the Irish border the outlook for Sterling remained rather bearish in nature.
Any easing in public sector net borrowing could offer some fresh support to GBP exchange rates, improving confidence in the underlying health of the domestic economy.
April’s raft of Eurozone PMIs generally bettered expectations yesterday, with the French and German services PMIs continuing to demonstrate a solid pace of growth. While the headline composite Eurozone PMI defied forecasts of a dip this was not enough to boost the Euro. The underlying details of the data failed to allay concerns that the currency union is losing some of its earlier economic momentum, with growth outside of France and Germany slowing to an eighteen-month low.
A weakening of the German IFO business sentiment survey may exacerbate the softness of EUR exchange rates today.
Both the US manufacturing and services PMIs proved stronger than anticipated, pointing towards another solid month of growth in April. This naturally boosted hopes that the world’s largest economy will see stronger growth in the second quarter of 2018, in spite of ongoing political concerns. With US bond yields pushing higher demand for the US Dollar continued to pick up, even as the general sense of geopolitical tensions and trade worries eased.
With forecasts pointing towards a dip in April’s US consumer confidence index, though, the strength of USD exchange rates could soon falter.
A sharp contraction in Canadian wholesale trade sales put a dent in CAD exchange rates overnight. This unexpected weakness undermined market optimism in the health of the Canadian economy, giving the Bank of Canada (BOC) further incentive to leave monetary policy on hold. The appeal of the Canadian Dollar was also limited as investors braced for the latest commentary from BOC Governor Stephen Poloz.
However, as long as the oil market remains in a relatively bullish mood this is likely to keep a floor under CAD exchange rates.
New Zealand Dollar
Although New Zealand credit card spending figures picked up in March the New Zealand Dollar remained on a downtrend. This was largely due to the strength of the US Dollar, which was in a bullish mood thanks to strong domestic data and rising bond yields. While consumer spending strengthened markets remain primarily concerned by the relative lack of inflationary pressure within the New Zealand economy.
In the absence of any fresh domestic data the appeal of the ‘Kiwi’ is unlikely to pick up today.
April 24th 11:30 AUD Consumer Price Index (YoY) (1Q) 2.0%
April 24th 18:00 EUR German IFO Business Climate (APR) 102.8
April 24th 18:30 GBP Public Sector Net Borrowing (MAR) 1.3 billion
April 25th 00:00 USD Consumer Confidence Index (APR) 126
Post by TorFX