Canadian Dollar Climbs as US Withdrawal From Iran Deal Boosts Oil

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Headlines

  • Risk Appetite Declined in Response to US Exit From Iran Nuclear Deal – Australian Dollar weighed down by geopolitical jitters
  • Pound Demand Limited Ahead of BoE Rate Decision – GBP exchange rates exposed to downside risk if policymakers prove dovish
  • Canadian Dollar Surged Higher on Oil Price Rally – Prospect of smaller global supply boosted oil prices
  • NZD Exchange Rates Held Ground in Anticipation of RBNZ Meeting – ‘Kiwi’ may falter on more cautious RBNZ outlook

Australian Dollar

Market risk appetite diminished sharply once the US announced its withdrawal from the Iranian nuclear deal as global geopolitical tensions picked up sharply. With investors piling back into safe-haven assets such as the US Dollar the mood towards the ‘Aussie’ naturally soured. This move offered a reminder of the Trump administration’s more hard-line approach to markets, raising concerns over the prospect of further protectionist and antagonistic policy measures to come.

Any weakening of the latest consumer inflation expectations measure is likely to add to the pressure on AUD exchange rates today.

Sterling

An unexpectedly sharp contraction in April’s BRC like-for-like retail sales left the Pound on somewhat shaky footing. This weakness highlights that consumers have continued to rein in their spending, something which could drag on economic growth. As the House of Lords voted through further amendments to the Brexit bill, however, investors maintain some hope that the UK could remain part of the customs union or single market after 2019.

Further volatility is forecast for GBP exchange rates in the wake of the Bank of England’s (BoE) policy meeting and the release of the quarterly Inflation Report.

Euro

A solid uptick in Italian retail sales on the year was not enough to bolster EUR exchange rates yesterday, with confidence in the domestic outlook remaining limited. Demand for the Euro was also limited as a result of the US walking away from the Iranian nuclear deal. With the Trump administration threatening sanctions against companies with exposure to Iran confidence in the economic outlook was knocked, as this threatens a number of Eurozone investments.

If the latest European Central Bank (ECB) Economic Bulletin proves more upbeat in outlook, however, this could offer support to the single currency.

US Dollar

Demand for the US Dollar rose sharply in the wake of the Trump administration’s decision to pull out of the Iran nuclear deal. Amidst a renewed sense of market risk aversion the appeal of the US Dollar naturally improved. This helped to limit the impact of weaker producer price index data, even though this suggests that inflationary pressure within the US economy may be weakening once again.

However, a stronger showing from tonight’s US consumer price index data could give USD exchange rates fresh cause for confidence.

Canadian Dollar

As oil prices rallied sharply in response to the US re-imposing sanctions on Iran this helped to shore up CAD exchange rates overnight. Brent crude surged higher to touch US$77 per barrel as investors reacted to the prospect of Iranian oil being removed from the global market. A larger-than-expected decline in US crude stockpiles encouraged further bullishness, giving the Canadian Dollar a boost across the board.

The latest Canadian new housing price index figures could offer additional support to the Canadian Dollar, providing the housing market shows fresh signs of strength.

New Zealand Dollar

While New Zealand card spending showed a surprise contraction in April this failed to particularly weigh down the ‘Kiwi’ yesterday. As markets began to brace for the Reserve Bank of New Zealand’s (RBNZ) May policy announcement, though, the downside potential of NZD exchange rates was limited. Even with market risk appetite weakening the New Zealand Dollar held onto a positive footing in anticipation of today’s meeting.

NZD exchange rates are likely to see increased jitters, however, in the wake of the RBNZ’s interest rate decision.

Data Released

May 10th 07:00 NZD Reserve Bank of New Zealand Rate Decision 1.75%
May 10th 11:00 AUD Consumer Inflation Expectation (MAY)
May 10th 18:00 EUR European Central Bank Economic Bulletin
May 10th 21:00 GBP Bank of England Rate Decision 0.50%
May 10th 22:30 CAD New Housing Price Index (YoY) (MAR)
May 10th 22:30 USD Consumer Price Index (YoY) (APR) 2.5%

Post by TorFX

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