Bullish US Dollar Weighs on Australian Dollar, New Zealand Dollar Demand

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  • Risk Aversion Limited Australian Dollar Demand – Weakening commodity prices weigh on AUD exchange rates
  • Shifting BoE Interest Rate Hike Odds Provoked GBP Volatility – Brexit jitters mute Pound outlook
  •  Rising US Yields Boosted US Dollar Rates – Softer home sales likely to dent USD
  •  Weaker-Than-Forecast Canadian Consumer Price Index – Bullish oil continues to support CAD demand

Australian Dollar
As global commodity prices weakened once again the Australian Dollar came under fresh pressure. With markets already discouraged by Thursday’s disappointing raft of Australian labour market data there was little incentive to buy into the ‘Aussie’. Declines in the Chinese financial markets added to the bearish mood of AUD exchange rates, with market risk appetite largely lacking ahead of the weekend.
Unless commodity prices pick back up today the mood towards the Australian Dollar looks set to remain muted.
Significant volatility was in store for the Pound during Friday’s European session, with the odds of a May Bank of England (BoE) interest rate hike shifting dramatically. GBP exchange rates slumped sharply after BoE Governor Mark Carney appeared to downplay the prospect of an imminent rate hike, noting the relative weakness of recent domestic data. However, as fellow BoE policymaker Michael Saunders expressed more hawkish sentiments this helped Sterling regain ground later in the day.
Worries over Brexit are likely to dominate the outlook for the Pound after the EU rejected the UK’s latest proposals for a resolution of the Irish border issue last week.
A surprise upward revision to the latest Eurozone consumer confidence index offered support to EUR exchange rates, with the index defying forecasts of a fresh dip. Even so, this was not enough to shore up the single currency against many of the majors. In large part the Euro struggled to gain any particular traction thanks to the influence of a stronger US Dollar.
EUR exchange rates could rally this evening, though, if April’s raft of Eurozone manufacturing and services PMIs point towards an uptick in economic activity at the start of the second quarter.
US Dollar
Confidence in the US Dollar picked up sharply ahead of the weekend as markets continued to bet on the prospect of the Federal Reserve adopting a more aggressive approach to monetary policy in the months ahead. Improving US bond yields offered additional support to USD exchange rates, with signs pointing towards a strengthening domestic economy. Weaker market risk appetite also helped to boost the appeal of the US Dollar as investors piled back into safer assets.
With growth in existing home sales forecast to have eased on the month in March, however, USD exchange rates are likely to soften.
Canadian Dollar
March’s Canadian consumer price index data proved weaker than forecast on Friday, with inflation clocking in at 2.3% rather than 2.4%. While this was a disappointment inflation is still running above the Bank of Canada’s (BOC) target, limiting the vulnerability of CAD exchange rates. As oil prices continued to trend comfortably above the US$70 per barrel mark this offered some degree of support to the Canadian Dollar.
If Canadian wholesale sales are found to have strengthened in line with forecasts this should give CAD exchange rates a fresh boost tonight.
New Zealand Dollar
In the absence of any supportive domestic data the New Zealand Dollar remained on a bearish footing on Friday. As investors have little cause for confidence in the domestic outlook NZD exchange rates were left to trend lower. With higher risk assets falling out of favour in the face of a stronger US Dollar the ‘Kiwi’ was naturally left on the back foot.
Even so, an increase in consumer credit card spending levels may help to shore up NZD exchange rates today.

Data Released

April 23rd 13:00    NZD    Credit Card Spending (YoY) (MAR)    
April 23rd 18:00    EUR    Eurozone Manufacturing PMI (APR P)    56.0
April 23rd 18:00    EUR    Eurozone Services PMI (APR P)    54.5
April 23rd 22:30    CAD    Wholesale Trade Sales (MoM) (FEB)    0.7%
April 24th 00:00    USD    Existing Home Sales (MoM) (MAR)    0.2%

Post by TorFX

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