Inflation Dip Prompts US Dollar Decline

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  • Absence of Australian Data Fails to Knock AUD Exchange Rates – Weaker private sector credit data may dampen appeal
  • US Dollar Falters as US Inflation Data Misses Forecast – Odds continue to favour neutral Federal Reserve outlook
  • Pound Trends Lower After EY Item Club Downgrades UK growth forecasts – GBP exchange rates soften as Brexit set to remain major drag on growth
  • Weak Eurozone Economic Confidence Limits Euro Strength – Higher German inflation set to offer rallying point

Australian Dollar Maintains Positive Footing
A lack of fresh domestic data failed to keep the Australian Dollar from trending higher at the start of the week.

As the latest US inflation data fell short of forecast overnight this gave AUD exchange rates an additional boost, benefitting from the weakening odds of a 2019 Federal Reserve interest rate hike.

Even so, as confidence in the outlook of the Australian economy remains muted this limited the upside potential of the Australian Dollar.
If private sector credit data weakens as forecast this morning AUD exchange rates could return to a downtrend.

Downgraded UK Growth Forecasts Limit Pound Demand
As leading forecaster EY Item Club downgraded its UK growth projections for 2019 and 2020 this gave investors incentive to sell out of the Pound. This fresh warning that Brexit uncertainty could drag on the economy throughout the remainder of the year left GBP exchange rates under pressure once again.

With MPs still failing to make any tangible progress towards a Brexit compromise the appeal of the Pound proved limited.
Another weak month for the GfK consumer confidence index may see the Pound shedding further ground this morning.
Weakened Eurozone Confidence Weighs on Euro
April’s Eurozone economic confidence index weakened further than forecast, falling from 105.6 to 104.0 this month. Coupled with another decline in consumer confidence this added to market worries over the outlook of the Eurozone economy.

As Sunday’s Spanish general election failed to deliver a parliamentary majority for the centre-left PSOE a sense of political uncertainty also weighed on EUR exchange rates.
However, the Euro could make solid gains tonight if the German consumer price index picks up as forecast on the year.
Disappointing Inflation Data Limits US Dollar Appeal
In another underwhelming development for the US economy March’s personal consumption expenditure core data missed expectations.

Crucially, the headline core PCE eased from 1.7% to 1.6% on the year, indicating that inflationary pressure diminished. This further undermined the case for the Federal Reserve to raise interest rates in the coming months, given that the PCE remains the central bank’s preferred measure of inflation.
An uptick in tonight’s US consumer confidence index may see USD exchange rates strengthening once again, however.

Weakening Oil Prices Drag on Canadian Dollar
The bearish mood of the global oil market saw the Canadian Dollar trending lower overnight as the impact of the latest push back against Iranian oil supply faded.

Although market risk appetite generally improved in the face of a weaker US Dollar this was not enough to prevent CAD exchange rates losing ground.
As forecasts point towards the Canadian gross domestic product faltering further in February the Canadian Dollar looks set to weaken further tonight.
New Zealand Dollar Muted Ahead of Unemployment and Activity Data
As anticipation mounted for this week’s raft of New Zealand data NZD exchange rates made some modest gains.

Although forecasts suggest an improvement in Wednesday’s unemployment rate investors remain wary of the prospect of further economic disappointments. Even so, the disappointing US inflation data helped the New Zealand Dollar to hold onto a positive footing for the time being.
Any deterioration in April’s ANZ activity outlook index may prompt the New Zealand Dollar to trend lower across the board today, though.

Data Releases

April 30th 09:01 GBP GfK Consumer Confidence (APR)
April 30th 11:00 NZD ANZ Activity Outlook (APR)
April 30th 22:00 EUR German Consumer Price Index (YoY) (APR)
April 30th 22:30 CAD Gross Domestic Product (YoY) (FEB)
May 1st 00:00 USD Consumer Confidence Index (APR)

Post by TorFX

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