Improving Odds of US-China Trade Deal Shore up Australian Dollar

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  • Australian Dollar Picks up on Reports of US-China Trade Progress – Stronger business confidence could add to AUD appeal
  • Fresh Brexit Rejection Prompts Pound Slump – MPs vote down Theresa May’s withdrawal agreement once again
  • US Dollar Falters as Inflation Measure Disappoints – Likelihood of Federal Reserve hawkishness continues to decline
  • Surprise Canadian Growth Encourages Canadian Dollar Gains – Confidence in economic outlook strengthens

US-China Trade Progress Boosts Australian Dollar

News of progress in US-China trade negotiations saw market risk appetite pick up ahead of the weekend, boosting the appeal of the Australian Dollar. Although any details of the progress proved scarce this was still enough to encourage investors, with worries over the global trade outlook easing. AUD exchange rates also benefitted from the underwhelming nature of the latest US inflation data as the odds of Federal Reserve hawkishness diminished further.

Demand for the Australian Dollar could pick up further this morning if the NAB business confidence index points towards a greater level of domestic optimism.

Latest Brexit Rejection Drives Fresh Pound Losses

As MPs rejected Theresa May’s withdrawal agreement on Friday this put the Pound under renewed pressure. The move came as little surprise to investors, given the DUP’s continued opposition to the proposal. With the risk of a no-deal Brexit on the rise again GBP exchange rates were left to slump, with the UK on course to crash out of the EU in April.

Unless the parliamentary deadlock over Brexit is broken the Pound looks set to remain biased to the downside in the days ahead.

Mixed German Unemployment Data Limits Euro Appeal

Germany’s latest unemployment data proved disappointing, even as the unemployment rate tightened from 5.0% to 4.9% in March. As the improvement was driven by a smaller-than-expected decrease in the number of unemployed individuals the impact of the data was limited. In the wake of the disappointing German inflation data this left the Euro struggling to gain any particular degree of traction against its rivals.

If the Eurozone consumer price index also falls short of forecasts tonight EUR exchange rates are likely to shed further ground.

US Dollar Falters on Weaker Personal Consumption Expenditure

Demand for the US Dollar weakened in response to a surprise easing of January’s personal consumption expenditure core reading. Investors were disappointed as the index slowed from 1.9% to 1.8% on the year, raising fresh worries over the outlook of the US economy. As the PCE remains the Federal Reserve’s preferred measure of inflationary pressure this weaker showing is likely to encourage policymakers to leave interest rates on hold for longer.

Unless tonight’s US advance retail sales data shows a solid improvement on the month the US Dollar may remain on a weaker footing.

Stronger Growth Boosts Canadian Dollar

Canadian gross domestic product data bettered forecasts in January as growth accelerated 0.3% on the month. This offered some reassurance to investors, suggesting that the Canadian economy is in a more robust state of health than previously thought. With growth at its strongest level since May CAD exchange rates were prompted to trend higher across the board heading into the weekend, also benefitting from market risk appetite.

Any signs of a slowdown in tonight’s manufacturing PMI, though, could see the Canadian Dollar come under fresh selling pressure.

Consumer Confidence Uptick Shores up New Zealand Dollar

A modest improvement in ANZ’s consumer confidence index helped to return the New Zealand Dollar to a positive footing on Friday. As sentiment picked up on the month in March this gave investors incentive to buy back into the weakened New Zealand Dollar. With market risk appetite generally bouncing back NZD exchange rates recovered some of their lost ground, in spite of the high odds of an impending Reserve Bank of New Zealand (RBNZ) interest rate cut.

Ahead of tomorrow’s Global Dairy Trade auction the New Zealand Dollar may soften once again.

Data Releases

April 1st 11:30    AUD    NAB Business Confidence (MAR)    4
April 1st 19:30    GBP    Manufacturing PMI (MAR)    51.3
April 1st 20:00    EUR    Eurozone Consumer Price Index (YoY) (MAR)    1.5%
April 1st 23:30    USD    Advance Retail Sales (MoM) (FEB)    0.2%
April 2nd 00:30    CAD    Manufacturing PMI (MAR)    52.8

Post by TorFX

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