Lower Unemployment Rate Unable to Shore up Australian Dollar

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  • Unemployment Rate Improvement Fails to Shore up Australian Dollar – Underlying signs point towards weakening labour market
  • Positive UK Retail Sales Fail to Shield Pound from Brexit Anxiety – Markets unnerved by disagreement over Brexit extension
  • ECB Economic Bulletin Points Towards Continued Dovishness – Euro under pressure ahead of Eurozone PMIs
  • Disappointing Gross Domestic Product Drags Down New Zealand Dollar – Confidence in New Zealand outlook diminishes further

Australian Dollar Falters on Mixed Labour Market Data

February’s labour market data proved rather mixed in nature, leaving the Australian Dollar on a weaker footing. Although the headline unemployment rate saw an improvement, unexpectedly falling from 5.0% to 4.9%, this was driven by a decline in the corresponding participation rate. With fewer Australians now active within the labour market the case for continued Reserve Bank of Australia (RBA) dovishness increased, to the detriment of AUD exchange rates.

Any fresh signs of weakness in this morning’s Australian manufacturing and services PMIs could encourage further Australian Dollar weakness.

Strong Retail Sales Fail to Boost Pound

Although the latest UK retail sales data bettered forecasts this was not enough to set the Pound on an uptrend last night. Investors were instead concerned by developments surrounding Brexit, with EU officials pushing back against Theresa May’s proposed three-month Brexit delay. Any deadline later than 22nd May would see the UK participate in the European parliamentary elections, prompting EU representatives to draw a red line over the date. With the odds of a no-deal Brexit mounting once again GBP exchange rates slumped.

The Pound is likely to see further volatility ahead of the weekend as markets continue to assess the likely outcome of the latest Brexit developments.

ECB Economic Bulletin Increases Pressure on Euro

The European Central Bank’s (ECB) latest Economic Bulletin did not offer the Euro any cause for confidence. Policymakers maintained a generally cautious outlook in the Bulletin, highlighting the underwhelming nature of Eurozone inflation and growth. This encouraged bets that the central bank will leave monetary policy looser for longer, giving investors fresh incentive to sell out of the single currency.

However, if the latest raft of Eurozone manufacturing and services PMIs show an improvement on the month this could offer EUR exchange rates a rallying point.

US Dollar Recovers Ground after Dovish Federal Reserve Meeting

In the wake of the Federal Open Market Committee’s (FOMC) unexpectedly dovish policy announcement the strength of USD exchange rates was naturally limited. With the Fed looking set to keep interest rates on hold for the remainder of the year demand for the US Dollar proved limited. Even so, a sharp rebound in March’s Philadelphia Fed business outlook index helped USD exchange rates to recover some of their lost ground overnight.

Fresh evidence of slowing economic momentum could weigh heavily on the US Dollar tonight, with forecasts pointing towards a sharp decline in January’s wholesale inventories data.

Canadian Dollar Benefits from Wholesale Trade Sales Uptick

A solid acceleration in wholesale trade sales gave investors fresh cause for confidence in the outlook of the Canadian economy. This helped to boost the Canadian Dollar against its rivals overnight as signs of economic resilience could limit the dovish bias of Bank of Canada (BOC) policymakers. As oil prices failed to hold onto their bullish trend, though, CAD exchange rates still struggled to gain significant momentum.

Tonight’s consumer price index data may drive further Canadian Dollar weakness if inflationary pressure fails to show signs of picking back up.

Disappointing Growth Drives New Zealand Dollar Lower

In a fresh blow to NZD exchange rates the fourth quarter gross domestic product fell short of forecast on the year. As growth clocked in at 2.3%, slowing from 2.6% in the third quarter, this raised fresh concerns over the outlook of the New Zealand economy. With the Reserve Bank of New Zealand (RBNZ) already taking a dovish stance on monetary policy the New Zealand Dollar slumped on the prospect of further policymaker caution.

In the absence of any New Zealand data NZD exchange rates could struggle to find any positive momentum over the course of the day.

Data Releases

March 22nd 09:00    AUD    Manufacturing PMI (MAR)    52.3
March 22nd 20:00    EUR    Eurozone Manufacturing PMI (MAR)    49.5
March 22nd 20:00    EUR    Eurozone Services PMI (MAR)    52.7
March 22nd 23:30    CAD    Consumer Price Index (YoY) (FEB)    1.4%
March 23rd 01:00    USD    Wholesale Inventories (MoM) (JAN)    0.1%

Post by TorFX

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