Fresh Escalation in US Trade Rhetoric Failed to Dent Australian Dollar

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Headlines

  • Australian Dollar Shook Off Trade War Jitters – Weaker construction PMI may dent ‘Aussie’ today
  • Rising UK Productivity Boosted GBP Exchange Rates – Concerns remain over strength of UK economic outlook
  • Euro Muted After Underwhelming Eurozone Retail PMIs – Eurozone economy shows fresh signs of slowing
  • Canadian Dollar Softened as Wage Growth Failed to Materialise – BOC looks set to remain on hold for longer

Australian Dollar

Even though the belligerent trade rhetoric of the US picked up again ahead of the weekend this was not enough to particularly dent AUD exchange rates. Markets remain largely hopeful that a full-blown trade war can still be avoided, limiting the negative impact on investor risk appetite for the time being. In the absence of any fresh domestic data, however, the Australian Dollar was unable to significantly capitalise on the latest weakening of the US Dollar.

With a slight softening forecast for March’s Australian construction PMI the ‘Aussie’ could well return to a weaker footing today.

Sterling

After a fairly muted day of trading the Pound rallied sharply during Friday’s European session, pushing higher across the board. Investors were somewhat encouraged by news that UK productivity had risen for a second consecutive quarter in the fourth quarter of 2017. This suggests that the underlying health of the domestic economy may be stronger than previously thought, giving Sterling an incentive to recover some of its lost ground.

Any signs of weakening in the Halifax house price index may see GBP exchange rates softening once again, though, as Brexit-based uncertainty continues to weigh on the domestic housing market.

Euro

A surprisingly sharp contraction in German industrial production on the month in February left the Euro on a softer footing ahead of the weekend. Confidence in the outlook of the Eurozone economy diminished further on the back of the latest raft of retail PMIs, which all showed a marked dip in March. With the Italian retail sector falling into a state of stagnation this encouraged speculation that the currency union will be unable to keep up its economic momentum in 2018.

If the German trade surplus widens as forecast this afternoon, however, EUR exchange rates could find a rallying point.

US Dollar

There was some disappointment as the US unemployment rate failed to fall as forecast for the second month in a row, holding steady at 4.1% instead. As this suggests that a decent degree of slack remains within the domestic labour market investors were encouraged to sell out of the US Dollar once again. Even so, this is unlikely to deter the Federal Reserve from pursuing its monetary tightening cycle, as wage growth picked up on the month.

Any fresh developments in the US-China trade standoff may prompt jitters for USD exchange rates in the near term.

Canadian Dollar

While March’s Canadian unemployment data largely matched expectations the Canadian Dollar still came under pressure on Friday. Although full time employment saw a strong rebound on the month this was overshadowed by a disappointing hourly earnings figure. With wage growth failing to accelerate the chances of any return to Bank of Canada (BOC) hawkishness is not on the cards, leaving CAD exchange rates to trend lower.

Any softening in Canadian housing starts may give the Canadian Dollar further cause for weakness.

New Zealand Dollar

The mixed nature of Friday’s US jobs report was not enough to give the New Zealand Dollar much in the way of support. With the threat of a US-China trade war still hanging over the global economy the appeal of the risk-sensitive ‘Kiwi’ remained rather limited. While the New Zealand economy is a little less exposed to the threat of a Chinese slowdown investors still took a less optimistic view on NZD exchange rates.

With domestic data thin on the ground the New Zealand Dollar remains vulnerable to any further deterioration in market sentiment.

Data Released

April 9th 08:30 AUD Construction PMI (MAR) 55.7
April 9th 16:00 EUR German Trade Balance (FEB) 19.5 billion
April 9th 17:30 GBP Halifax House Price Index (YoY) (MAR) 2.1%
April 9th 22:15 CAD Housing Starts (MAR)

Post by TorFX

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