Pound Fails to Benefit From BoE Hawkishness

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Headlines

  • NAB Business Confidence Report Boosted Australian Dollar – Market risk appetite picked up once again
  • Hawkish BoE Commentary Failed to Prompt GBP Rally – Weaker first quarter UK GDP to weigh on Sterling sentiment
  • Canadian Dollar Strengthened as Brent Broke Back Above US$70 – Mixed housing data failed to weigh down CAD rates
  • Higher Producer Prices Unable to Shore up US Dollar – Rising consumer price index may encourage USD strength

Australian Dollar

While the headline NAB business confidence index dipped from 9 to 7 in March the underlying details of the accompanying report were rather more encouraging. As businesses sounded a relatively optimistic note on the domestic outlook this helped to shore up AUD exchange rates on Tuesday. The mood towards the antipodean currency improved further after Chinese president Xi Jinping took a slightly more conciliatory note on the subject of trade.

A similarly positive showing from the Westpac consumer confidence index could see the Australian Dollar extending its gains further.

Sterling

Comments from Bank of England (BoE) policymaker Ian McCafferty offered a boost to the Pound during Tuesday’s European session. Even though McCafferty is well known to be one of the more hawkish members of the Monetary Policy Committee (MPC) markets were still encouraged by his more optimistic tone. However, as the prospect of a May interest rate hike is not yet certain Sterling struggled to hold onto its initial uptick for long.

If the NIESR gross domestic product for the three months to March indicates that the economy lost further momentum this is likely to keep GBP exchange rates under pressure.

Euro

European Central Bank (ECB) policymaker Ewald Nowotny encouraged some market jitters overnight. As Nowotny noted that now is the time to ‘start the gradual normalisation of monetary policy’ this naturally fostered hopes that the central bank will soon shift away from its dovish bias. Even so, the ECB still looks to be a fair way away from returning to a monetary tightening cycle and raising interest rates from their long-standing lows.

Investors will be closely watching ECB President Mario Draghi this evening, with any hints on monetary policy likely to provoke significant Euro volatility.

US Dollar

Stronger-than-expected US producer price index data failed to encourage any particular demand for the US Dollar. While the uptick in producer prices suggests that inflationary pressure within the US economy is continuing to pick up this was not enough to keep USD exchange rates on a stronger footing. With market risk appetite strengthening in response to the latest Chinese comments on trade the appeal of the safe-haven US Dollar was generally limited.

Even so, a similarly strong showing from tonight’s consumer price index could still offer USD exchange rates a rallying point.

Canadian Dollar

The Canadian housing market continued to offer mixed signals to markets, with a stronger-than-expected housing starts figure contrasting a sharp contraction in building permits. However, this failed to particularly weigh on CAD exchange rates overnight. As Brent crude broke back above the psychologically important US$70 per barrel mark this offered support to the commodity-correlated Canadian Dollar, even though the outlook of the oil market remains rather volatile.

As long as oil prices remain supported at elevated levels the Canadian Dollar should hold onto some of its latest gains.

New Zealand Dollar

Unsurprisingly, the New Zealand Dollar continued to benefit from the general improvement in market sentiment yesterday. With investors hopeful that the US and China will be able to avoid a full-blown trade war demand for the higher-yielding ‘Kiwi’ remained elevated. Even a lack of fresh domestic data was not enough to dent NZD exchange rates.

Another contraction in the ANZ truckometer could knock the New Zealand Dollar off its stronger footing, however.

Data Released

April 11th 08:00 NZD ANZ Truckometer Heavy (MoM) (MAR)
April 11th 10:30 AUD Westpac Consumer Confidence (APR)
April 11th 21:00 GBP NIESR Gross Domestic Product Estimate (MAR) 0.3%
April 11th 21:00 EUR ECB’s Draghi Speaks in Frankfurt
April 11th 22:30 USD Consumer Price Index (YoY) (MAR) 2.4%

Post by TorFX

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