Signs of RBA Caution Limit Australian Dollar

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  • Persistent RBA Caution Weighs on Australian Dollar – Weaker leading index may point towards economic slowdown
  • Pound Sinks as Third Meaningful Vote Ruled Out – Sense of Brexit uncertainty persists as hopes for May’s deal diminish
  • Improved German Economic Sentiment Unable to Buoy Euro – Confidence in economic outlook remains limited
  • New Zealand Dollar Recovers Ground after Disappointing Consumer Confidence Index – Risk appetite shores up NZD exchange rates

Neutral RBA Minutes Limit Australian Dollar Appeal

The Reserve Bank of Australia’s (RBA) meeting minutes failed to offer AUD exchange rates much in the way of support yesterday. While policymakers acknowledged concerns over the slowdown in the domestic housing market they nevertheless maintained a neutral outlook. With interest rates looking set to remain on hold for at least the near future the appeal of the Australian Dollar was naturally limited.

Another underwhelming reading from the latest Westpac leading index could weigh heavily on AUD exchange rates this morning, with investors wary of any fresh signs of easing economic growth.

Pound Softens after Third Meaningful Brexit Vote Ruled Out

Confidence in the Pound remained limited in the wake of the House of Commons Speaker John Bercow’s decision to rule out a third meaningful vote on Theresa May’s Brexit deal. As Bercow advised that the deal needs to see ‘substantial’ change before it can be brought before another parliamentary vote this prompted a fresh bout of uncertainty. Although the UK unemployment rate unexpectedly improved to a 44-year low this was not enough to prevent GBP exchange rates from trending lower.

However, this evening’s UK consumer price index data could still offer the Pound a rallying point.

Improving German Economic Confidence Fails to Boost Euro

Investors were relieved by an unexpectedly strong improvement in March’s German ZEW economic sentiment survey. While the index remained in negative territory it still saw a solid uptick on the month, picking up from -13.4 to -3.6. This suggests that confidence within the German economy is starting to recover, in spite of the underwhelming nature of recent data. However, the Euro struggled to capitalise on this improvement as Eurozone construction output slumped.

Any signs of an uptick in February’s German producer price index figures may encourage the single currency to push higher against its rivals, though.

Underwhelming Factory Orders Drive US Dollar Down

US factory orders failed to pick up as forecast in January, showing only growth of 0.1% on the month. This underwhelming showing left USD exchange rates on the back foot overnight as confidence in the outlook of the world’s largest economy remained muted. A downward revision to January’s durable goods orders data also weighed on the US Dollar, with signs continuing to point towards a loss of economic momentum.

Ahead of the Federal Open Market Committee’s (FOMC) March policy meeting USD exchange rates are unlikely to return to a stronger footing.

Risk Appetite Benefits Canadian Dollar

With market risk appetite picking up the Canadian Dollar was encouraged to trend higher across the board last night. Even in the absence of any fresh Canadian data CAD exchange rates were able to gain traction, benefitting from the relative weakness of the US Dollar. However, the Canadian Dollar may struggle to hold onto this positive footing for long thanks to increasing doubts surrounding the outlook of the domestic economy.

If oil prices come under increasing pressure this could undermine the appeal of the Canadian Dollar further.

New Zealand Dollar Strengthens in spite of Consumer Confidence Decline

The first quarter Westpac consumer confidence index offered little cause for optimism, easing from 109.1 to 103.8. Even so, the mood towards the New Zealand Dollar still improved yesterday as demand for the US Dollar continued to sour. With market risk appetite picking up NZD exchange rates returned to a stronger footing, in spite of this latest sign of domestic weakness.

A narrowing of the fourth quarter current account deficit could offer the New Zealand Dollar an additional boost this morning.

Data Releases

March 20th 08:45    NZD    Current Account Balance (4Q)    -3.5 billion
March 20th 10:30    AUD    Westpac Leading Index (MoM) (FEB)    
March 20th 18:00    EUR    German Producer Price Index (YoY) (FEB)    2.9%
March 20th 20:30    GBP    Consumer Price Index (YoY) (FEB)    1.9%
March 21st 05:00    USD    Federal Open Market Committee Rate Decision    2.5%

Post by TorFX

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