Euro Falters on Persistently Dovish ECB Commentary

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Headlines

  • Smaller-Than-Forecast Contraction in Home Loans Boosted AUD Rates – Focus falls on RBA Financial Stability Review
  • Euro Slipped Lower as ECB Maintained Dovish Outlook – Widened Eurozone trade surplus may boost single currency
  • Rising NZ Card Spending Shored up New Zealand Dollar – Signs point towards stronger domestic economy
  • Stagnating UK Housing Market Weighed Down Sterling – Speculation over BoE outlook continues

Australian Dollar

Shifting global geopolitical tensions prompted fresh volatility for the Australian Dollar yesterday, with the US and Russia locking horns over Syria. This muted the appeal of the risk-sensitive ‘Aussie’, encouraging investors to favour safe-haven assets instead. A smaller-than-expected contraction in home loans on the month limited the downside vulnerability of AUD exchange rates, however, with domestic inflation expectations also remaining solid.

The latest Reserve Bank of Australia (RBA) Financial Stability Review is likely to prompt further jitters today, even though any shift in the central bank’s outlook appears to be a slim prospect.

Sterling

Another stagnant RICS house price balance figure gave the Pound little in the way of encouragement on Thursday, pointing towards continued weakness within the domestic housing market. As the British Chambers of Commerce quarterly economic survey also adopted a rather downbeat tone on the domestic outlook this added to the softness of GBP exchange rates. However, as investors remain confident in the prospect of a May Bank of England (BoE) interest rate hike Sterling soon shrugged this disappointment off.

In the absence of any fresh domestic data today, though, the Pound could struggle to avoid some loss of traction against its rivals.

Euro

In another negative surprise for EUR exchange rates the Eurozone industrial production data fell short of forecast, clocking in a surprise -0.8% contraction on the month. This naturally added to concerns over the currency union’s ability to sustain its earlier economic momentum in 2018. As the latest European Central Bank (ECB) meeting minutes also proved rather dovish in tone there was little cause for confidence in the Euro overnight.

A widening of the Eurozone trade surplus could help to support the Euro this afternoon, even as the prospect of any ECB tightening remains distinctly distant.

US Dollar

The latest US jobless claims figures proved disappointing overnight, indicating that a degree of slack remains within the domestic labour market. As this suggests the unemployment rate is likely to hold steady at 4.1% for a little longer the odds of a more aggressive pace of Federal Reserve monetary tightening appeared to diminish. Even so, this was not enough to hold the US Dollar on a downtrend for long, in part thanks to the relative weakness of the Euro.

As forecasts point towards a dip in the University of Michigan consumer sentiment index for April the US Dollar could still see fresh losses ahead of the weekend.

Canadian Dollar

February’s new housing price index knocked some of the wind out of the Canadian Dollar’s sails yesterday, with prices found to have contracted -0.2% on the month. With the Canadian housing market appearing to remain under pressure this naturally weighed on CAD exchange rates. Even the persistent bullishness of oil prices was not enough to hold up the Canadian Dollar for the time being.

A similarly disappointing showing from tonight’s existing home sales figure may push CAD exchange rates lower still.

New Zealand Dollar

A sharp uptick in New Zealand retail card spending offered encouragement to NZD exchange rates on Thursday. Investors took heart from news that spending had accelerated 1.0% on the month in March, indicating a greater level of domestic confidence. Even with markets in a rather jittery mood thanks to global geopolitical tensions the New Zealand Dollar made solid gains across the board.

If March’s manufacturing PMI points towards stronger domestic growth the ‘Kiwi’ is likely to remain on an uptrend heading into the weekend.

Data Released

April 13th 08:30 NZD Manufacturing PMI (MAR)
April 13th 11:30 AUD Reserve Bank of Australia Financial Stability Review
April 13th 16:00 EUR Eurozone Trade Balance s.a. (FEB) 20.1 billion
April 13th 23:00 CAD Existing Home Sales (MoM) (MAR)
April 14th 00:00 USD University of Michigan Sentiment (APR P) 100.5

Post by TorFX

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