- Mixed Australian Labour Market Data Left Australian Dollar Limited Support – Both unemployment and participation rates unexpectedly rose
- Brexit Jitters Continued to Weaken GBP Exchange Rates – Future relationship with customs union remains up in the air
- Stronger Business Confidence Boosted US Dollar Demand – USD benefits from geopolitical tensions
- Surging Oil Prices Failed to Shore up Canadian Dollar – Markets brace for latest inflation data
April’s raft of Australian labour market data proved rather mixed in nature, limiting the impact on AUD exchange rates. Although the headline unemployment rate showed a surprise uptick from 5.5% to 5.6% this was largely driven by the corresponding increase in the participation rate. With a greater number of Australians now active within the jobs market confidence in the domestic outlook improved somewhat, although the Australian Dollar struggled to significantly capitalise on this.
Any increase in global geopolitical tensions could weigh on AUD exchange rates heading into the weekend.
Reports that the UK could be willing to remain a member of the customs union until at least 2021, in order to avoid the issue of a hard Irish border, failed to buoy Sterling for long. Prime Minister Theresa May was quick to counter the reports, indicating that the UK is still on course to leave the customs union. With the UK government still looking rather divided on the likely shape of the UK’s future relationship with the EU the mood of GBP exchange rates has remained bearish.
Ahead of the weekend the Pound remains vulnerable to Brexit-based jitters in the absence of any fresh domestic data.
As March’s Eurozone construction output data failed to strengthen as far as forecast this limited the potential for Euro gains yesterday. While output still picked up on the year, strengthening 0.8%, concerns remain over the underlying health of the Eurozone economy. Comments from European Central Bank (ECB) vice president Vitor Constancio offered little in the way of support to EUR exchange rates, as the policymaker continued to call for a closer economic and monetary union.
As forecasts point towards a widening of the Eurozone trade surplus, however, the Euro could find cause for a rally today.
A better-than-expected uptick in May’s Philadelphia Fed business outlook index helped to push the US Dollar higher overnight. Investors were encouraged to find that the index had jumped from 23.2 to 34.4 on the month, indicating that sentiment is strengthening within the domestic economy. A modest improvement in April’s leading index gave USD exchange rates an additional boost, with signs continuing to point towards the Federal Reserve taking a more aggressive approach to monetary tightening.
Commentary from Fed policymakers could help to spur further gains for USD exchange rates tonight.
Although oil prices surged higher once again during Thursday’s European session this was not enough to set Canadian Dollar exchange rates on a bullish run. With French energy firm Total preparing to pull out of Iran the price of Brent crude broke back above US$80 per barrel for the first time since 2014. While markets are confident that further gains are in store this failed to boost CAD exchange rates, with investors bracing for the latest Canadian inflation data.
If there are any signs of weakening within the consumer price index this could prompt a fresh bout of Canadian Dollar selling.
New Zealand Dollar
An easing in the first quarter New Zealand producer price index data highlighted the continued weakness of inflationary pressure within the domestic economy. This naturally left NZD exchange rates on a softer footing as this looks set to keep the Reserve Bank of New Zealand (RBNZ) in its more dovish policy mentality. A stronger US Dollar also weighed on demand for the New Zealand Dollar on Thursday.
Market risk aversion is likely to encourage further NZD exchange rates weakness today.
May 18th 19:00 EUR Eurozone Trade Balance (MAR) 27.9 billion
May 18th 22:30 CAD Consumer Price Index (YoY) (APR) 2.3%
Post by TorFX