Pound Unable to Maintain Positive Momentum in spite of No-Deal Brexit Rejection

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  • Underwhelming Chinese Industrial Output Limits Australian Dollar Appeal – Confidence muted in spite of inflation expectations improvement
  • Pound Falls Back from Multi-Month Highs after No-Deal Brexit Rejected – Markets remain wary of further political uncertainty
  • Weaker German Inflation Drags Euro Down – Investors unimpressed as odds of ECB action remain muted
  • Canadian Dollar Falters on Surprise House Price Contraction – Canadian housing market shows fresh signs of weakness

Weak Chinese Industrial Production Weighs on Australian Dollar

As the latest Chinese industrial production data fell short of forecast this left the Australian Dollar on a weaker footing. In another blow for the world’s second largest economy industrial output missed estimates in February, suggesting that the economic outlook remains muted. Given the Australian Dollar’s position as a common proxy for the health of the Chinese economy this left AUD exchange rates under pressure yesterday, even as March’s consumer inflation expectations picked up.

Unless market risk appetite improves today the potential for an Australian Dollar rebound looks slim.

Pound Fails to Hold onto Multi-Month Highs Amid Brexit Speculation

The Pound hit multi-month highs against its rivals as MPs voted to rule out a no-deal Brexit, easing fears that the UK could crash out of the EU in two weeks’ time. However, GBP exchange rates failed to hold onto this strength for long thanks to the sustained sense of uncertainty that still surrounds the Brexit process. As Parliament debated an extension of the Article 50 deadline, as well as the possibility of a second referendum, this kept the Pound on the back foot against its rivals.

Any fresh Brexit developments are likely to provoke further volatility for GBP exchange rates for the foreseeable future.

Euro Stumbles as German Inflation Revised Down

Investors were not impressed as the finalised German consumer price index data for February saw a downward revision. With inflation clocking in at 1.5%, rather than 1.6%, on the year the mood towards the single currency naturally soured. All in all, this weaker showing gave European Central Bank (ECB) policymakers further incentive to leave interest rates on hold for longer. As the US Dollar recovered some of its lost ground this put additional pressure on the Euro.

A similar revision to today’s Eurozone consumer price index data could see EUR exchange rates slump sharply ahead of the weekend.

Solid Import Indexes Encourage US Dollar Gains

Better-than-expected US import and export price index figures encouraged the US Dollar to push higher last night, with signs pointing towards stronger inflationary pressure. This helped to overshadow underwhelming jobless claims data and a sharp slump in new home sales on the month. As export prices rebounded firmly on the month this helped to lift USD exchange rates from their recent slump, especially in the face of weakening global risk appetite.

An improvement in the University of Michigan consumer sentiment index may encourage the US Dollar to gain further ground tonight.

House Price Contraction Dampens Canadian Dollar Appeal

January’s new housing price index failed to encourage confidence in the outlook of the Canadian economy, revealing a surprise contraction on both the month and the year. With the domestic housing market continuing to show signs of weakness the appeal of the Canadian Dollar diminished. As oil prices failed to hold onto their recent gains this helped to dent CAD exchange rates further.

Unless manufacturing sales data shows a strong rebound on the month tonight the strength of the Canadian Dollar is likely to remain limited.

New Zealand Dollar Under Pressure Ahead of Manufacturing PMI

NZD exchange rates continued their decline yesterday as market risk appetite diminished. In the absence of any fresh New Zealand data investors lacked incentive to favour the antipodean currency over its rivals. With confidence in the economic outlook already limited the New Zealand Dollar fell further out of favour overnight.

Solid signs of growth from this morning’s manufacturing PMI could help the New Zealand Dollar to recover some of its recent losses, however.

Data Releases

March 15th 08:30   NZD   Manufacturing PMI (FEB) 52.9
March 15th 21:00   EUR   Eurozone Consumer Price Index (YoY) (FEB) 1.5%
March 15th 23:30   CAD   Manufacturing Sales (MoM) (JAN) 0.4%
March 16th 01:00   USD   University of Michigan Consumer Sentiment Index (MAR) 95.6

Post by TorFX

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