Euro Slips as German Factory Output Plunges

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  • Australian Dollar Remains on Positive Footing on Hopes of US-China Trade Breakthrough – Weaker construction sector growth may weigh on AUD
  • Sharp Fall in German Factory Orders Drives Euro Weakness – Confidence in German outlook deteriorates further
  • Brexit Anxiety Keeps Pound Under Pressure – GBP exchange rates fail to benefit from vote calling for deadline extension
  • Canadian Dollar Gains Ground Ahead of Unemployment Data – Signs of labour market slack may prompt CAD selling

US-China Trade Talk Hopes Encourage Australian Dollar

The prospect of an imminent breakthrough in US-China trade talks helped to shore up AUD exchange rates as the general sense of market risk appetite improved. Speculation that a fresh US-China summit could be on the cards encouraged investors to continue piling into risk-sensitive assets yesterday. While concerns over the growth outlook of the global economy remain this was not enough to dent the appeal of the Australian Dollar.

Another underwhelming monthly performance from the Australian construction PMI, however, could see AUD exchange rates return to a weaker footing today.

Anxiety over Brexit Continues to Dominate Pound Outlook

Although MPs approved a bill granting Parliament the power to seek a further extension of the Brexit deadline this failed to give the Pound much in the way of encouragement. With EU leaders showing limited appetite for offering the UK another short Brexit extension the risk of a no-deal Brexit appears to persist. Coupled with news that new car sales continued to weaken last month this left GBP exchange rates on the back foot.

As forecasts point towards the Halifax house price index falling sharply on the month in March the appeal of the Pound is unlikely to improve ahead of the weekend.

Unexpectedly Sharp German Factory Orders Fall Dents Euro

Confidence in the outlook of the German economy took a fresh blow as February’s factory orders data fell significantly short of forecast. Investors were caught off guard as orders plunged -8.4% on the year, with orders now in their longest period of decline since 2009. This left EUR exchange rates lacking in support as Germany looks set to remain in a state of downturn for longer. March’s European Central Bank (ECB) meeting minutes failed to encourage any particular sense of Euro demand.

A similarly disappointing showing from February’s German industrial production data could see the single currency shed further ground.

Falling Jobless Claims Shore up US Dollar

US jobless claims data proved positive last night, offering the US Dollar a boost against its rivals. With the labour market showing fresh signs of tightening fears of a potential US recession temporarily eased. This improvement also bodes well ahead of tonight’s non-farm payrolls report, encouraging bets that employment levels picked up once again. Even though market risk appetite strengthened this was not enough to dent USD exchange rates for the time being.

If the labour market shows further evidence of tightening tonight the mood towards the US Dollar is likely to improve further.

Stronger Business Confidence Buoys Canadian Dollar

Demand for the Canadian Dollar picked up in response to a solid uptick in the latest Ivey PMI, which strengthened from 50.6 to 54.3 on the month. With the Canadian economy demonstrating signs of resilience CAD exchange rates were encouraged to trend higher across the board. Stronger business confidence suggest that the economy could find further strength in the months ahead, limiting the risk of Bank of Canada (BOC) dovishness.

However, tonight’s Canadian unemployment data could see CAD exchange rates return to a weaker footing if the data fails to impress.

New Zealand Dollar Muted in Absence of Domestic Confidence

A lack of fresh domestic data limited the New Zealand Dollar’s potential yesterday, even as the general sense of market risk appetite picked up. Investors continue to lack any particular sense of confidence in the outlook of the New Zealand economy, keeping NZD exchange rates biased to the downside.

A breakthrough in the US-China trade dispute could encourage the New Zealand Dollar to recover some ground over the course of the day, however.

Data Releases

April 5th 08:30    AUD    Construction PMI (MAR)    46.6
April 5th 17:00    EUR    German Industrial Production (YoY) (FEB)    -0.8%
April 5th 18:30    GBP    Halifax House Price Index (MoM) (MAR)    -2.4%
April 5th 23:30    CAD    Unemployment Rate (MAR)    5.8%
April 5th 23:30    USD    Change in Non-Farm Payrolls (MAR)    180,000

Post by TorFX

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