Hopes of US-China Trade Progress Fail to Sustain Australian Dollar

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  • Australian Dollar Falters as Hopes of US-China Trade Progress Diminish – Dovish RBA minutes may drive further AUD losses
  • Rising UK House Prices Bolster Pound Strength – Wage growth uptick set to offer additional boost
  • Improved Empire Manufacturing Index Fails to Shore up US Dollar – Trade tensions weigh on USD exchange rates
  • New Zealand Dollar Softens as Services PMI Falls Short – Signs point towards weakening economic momentum

Hopes of US-China Trade Progress Offer Limited Australian Dollar Support

Reports that the US could drop its demand for China to end industrial subsidies helped to shore up the risk-sensitive Australian Dollar at the start of the week. As US officials expressed optimism over the weekend markets were encouraged to bet on the prospect of an impending breakthrough in trade talks. However, this initial positivity soon faded as US Treasury Secretary Steven Mnuchin rowed back on his earlier optimism.

The release of the Reserve Bank of Australia’s (RBA) April meeting minutes could see AUD exchange rates come under further pressure this morning.

Resilient Housing Prices Boost Pound

April’s Rightmove housing price index showed a solid improvement on the month, rising 1.1% as the UK housing market shook off worries over Brexit. Although confidence in the outlook of the domestic market remains limited this was enough to offer the Pound a solid boost against its rivals. Although Theresa May affirmed that no-deal Brexit preparations will continue in spite of the extended deadline this failed to put any particular dampener on GBP exchange rates.

If average weekly earnings accelerate as forecast this could encourage the Pound to recover further ground this evening.

Euro Strengthens Despite Lack of Eurozone Data

Even though no fresh Eurozone data saw release on Monday the mood towards the Euro nevertheless improved. As EU ministers agreed to open fresh trade discussions with the US investors found cause for confidence. Although the threat of the US imposing fresh tariffs on a raft of Eurozone produce remains the prospect of positive trade talks still gave the Euro a boost. 

EUR exchange rates could find further support on the back of tonight’s German ZEW economic sentiment index, with forecasts pointing towards a return to positive territory.

Resilient Manufacturing Data Fails to Benefit US Dollar

A better-than-expected uptick in April’s Empire manufacturing index failed to offer the US Dollar any particular support last night. Although the index strengthened from 3.7 to 10.1, suggesting a greater level of resilience within the manufacturing sector, this was not enough to encourage investors. With the US economy looking set to remain under pressure from trade tensions for the foreseeable future the upside potential of the US Dollar proved limited.

A stronger showing from the NAHB housing market index could give USD exchange rates a boost tonight, however.

Canadian Dollar Falters as Existing Home Sales Miss Forecast

Investors were disappointed as March’s Canadian existing home sales data fell short of forecast, showing growth of 0.9% rather than 2.0%. While this improvement still saw the sector reverse the decline seen in the previous month CAD exchange rates were left exposed to fresh selling pressure. Signs that Russia could be prepared to raise its oil production in the months ahead, breaking away from the OPEC-led agreement, the mood towards the Canadian Dollar soured further.

As forecasts point towards a stagnant month of manufacturing sales in February CAD exchange rates could face further losses overnight.

Underwhelming Services PMI Limits New Zealand Dollar Appeal

March’s New Zealand services PMI followed in the footsteps of the manufacturing PMI, easing on the month as economic momentum faded. This put renewed pressure on the New Zealand Dollar, with signs pointing towards another month of lacklustre growth. As market risk appetite generally diminished this put additional pressure on NZD exchange rates last night.

If the results of the latest Global Dairy Trade auction fail to show an uptick in prices the New Zealand Dollar could shed additional ground.

Data Releases

April 16th 11:30    AUD    Reserve Bank of Australia Meeting Minutes (APR)    
April 16th 18:30    GBP    Average Weekly Earnings (3M/YoY) (FEB)    3.5%
April 16th 19:00    EUR    German ZEW Economic Sentiment Survey (APR)    0.5
April 16th 22:30    CAD    Manufacturing Sales (MoM) (FEB)    0%
April 17th 00:00    USD    NAHB Housing Market Index (APR)    64

Post by TorFX

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