Pound Recovers Ground as UK Growth Avoids Stagnation

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  • Australian Dollar Strengthens on Positive Consumer Confidence Index – RBA policymaker diminishes odds of interest rate cut
  • GBP Exchange Rates Find Support as UK GDP Avoids Stagnation – Brexit uncertainty continues to cloud Pound outlook
  • Cautious ECB Message Limits Euro Demand – Weak German inflation to add to EUR exchange rate softness today
  • US Consumer Price Index Acceleration Fails to Shore up US Dollar – Confidence in US economic outlook remains limited

Stronger Consumer Confidence Supports Australian Dollar

As the Westpac consumer confidence index showed a surprise improvement on the month this helped to shore up the Australian Dollar. With domestic sentiment showing signs of resilience AUD exchange rates gained further ground. Comments from Reserve Bank of Australia (RBA) Deputy Governor Guy Debelle also offered support to the Australian Dollar as the odds of an interest rate cut declined further.

If the latest Australian consumer inflation expectations survey points towards a higher level of inflationary pressure this could give AUD exchange rates an additional boost.

Surprise UK Growth Benefits Pound

The mood towards the Pound improved yesterday as February’s UK growth and production data bettered expectations. Rather than stagnating on the month as forecast the gross domestic product instead clocked in at 0.2%. With the economy showing greater signs of resilience in the face of Brexit-based uncertainty investors saw greater incentive to pile into GBP exchange rates once again. As investors remained hopeful that officials could agree a fresh extension of the Brexit deadline this also limited the vulnerability of the Pound.

With the UK housing market expected to show fresh signs of a slowdown this morning, however, the Pound looks set to fall out of favour once again.

ECB Cautiousness Continues to Weigh on Euro

April’s European Central Bank (ECB) policy announcement saw the Euro come under fresh pressure, with policymakers maintaining a cautious outlook on the Eurozone economy. As ECB President Mario Draghi warned that risks remain to the downside for growth this left the single currency on a weaker footing against its rivals. Although the ECB looks set to leave monetary policy on hold in the near future investors still took the commentary as a dovish signal.

Confirmation that the German consumer price index eased in March looks set to keep EUR exchange rates biased to the downside today.

US Dollar Fails to Capitalise on Stronger Consumer Price Index

While the US consumer price index saw a better-than-expected acceleration on the year in March this failed to give USD exchange rates any significant boost. As the CPI is not the Federal Reserve’s preferred measure of inflationary pressure the impact of the data proved limited. Fresh signs of weakness in hourly earnings put additional pressure on the US Dollar, with confidence in the outlook of the world’s largest economy still muted.

With jobless claims forecast to show an uptick on the week the mood towards the US Dollar could sour further tonight.

Rising US Oil Inventories Limit Canadian Dollar Demand

Another sharp increase in US crude oil inventories limited the appeal of the commodity-correlated Canadian Dollar last night. While oil prices remained near their recent five-month highs this was not enough to shore up the Canadian Dollar in the face of worries over the health of the oil market. Persistent anxiety over the outlook of the global economy and deteriorating trade conditions also kept CAD exchange rates under pressure.

A modest rebound in the Canadian new housing price index could offer a rallying point to CAD exchange rates.

New Zealand Dollar Softens Ahead of Food Price Data

In the absence of any fresh New Zealand data NZD exchange rates struggled to find any traction yesterday. Global trade tensions limited the appeal of the New Zealand Dollar, with markets still unsettled by the lack of progress towards a final US-China trade deal. The relative strength of the Australian Dollar also put some pressure on NZD exchange rates.

Any weakness in this morning’s food price index could weigh heavily on the New Zealand Dollar, with evidence of softer inflation likely to encourage further Reserve Bank of New Zealand (RBNZ) dovishness.

Data Releases

April 11th 08:54    NZD    Food Price Index (MoM) (MAR)    
April 11th 09:01    GBP    RICS House Price Balance (MAR)    -29%
April 11th 10:00    AUD    Consumer Inflation Expectations (APR)    4.0%
April 11th 16:00    EUR    German Consumer Price Index (YoY) (MAR F)    1.3%
April 11th 22:30    CAD    New Housing Price Index (YoY) (FEB)    0.1%
April 11th 22:30    USD    Continuing Jobless Claims (MAR 30)    210,000

Post by TorFX

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