Slowing Chinese Manufacturing Drags Australian Dollar Down

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  • Weaker Chinese Manufacturing Sector Dents Australian Dollar – Easing private sector credit growth adds to AUD weakness
  • Hopes of Brexit Progress Shore up Pound – Softening manufacturing sector could see GBP exchange rates slump
  • Leap in German Inflation Fails to Boost Euro Strength – Markets still see little odds of greater ECB confidence
  • Canadian Dollar Slumps After Surprise Economic Contraction – Weak GDP weighs heavily on CAD exchange rates

Weaker Private Sector Credit Growth Limits Australian Dollar
Demand for the Australian Dollar diminished on the back of a weaker-than-expected private sector credit figure, which saw credit growth ease from 4.1% to 3.9% on the year. AUD exchange rates also came under pressure as a result of the latest Chinese manufacturing PMI. As manufacturing in the world’s second largest economy slowed almost to a state of stagnation in April the appeal of the risk-sensitive Australian Dollar naturally weakened.
A steady showing from this morning’s manufacturing PMI may encourage AUD exchange rates to recover some of their lost ground, however.
Pound Jumps on Hopes of Brexit Progress
GBP exchange rates pushed sharply higher across the board last night, even after the GfK consumer confidence index held steady at -13. In spite of consumer confidence remaining firmly within negative territory the mood towards the Pound nevertheless improved. Reports that Brexit discussions between the Labour and Conservative leaderships are proving ‘constructive’ saw investors piling back into the Pound as hopes of a potential compromise blossomed.
Even so, signs of a slowdown in April’s UK manufacturing PMI could see GBP exchange rates come under renewed pressure this evening.
Euro Demand Limited in spite of German Inflation Surge
The German consumer price index significantly bettered forecasts last night, leaping from 1.3% to 2.0% on the year. This strong surge in inflationary pressure failed to encourage any particular sense of bullishness for EUR exchange rates, however, with the odds of any European Central Bank (ECB) policy action still limited. Investors also failed to capitalise on the positive nature of the first quarter Eurozone gross domestic product, with political anxiety still weighing heavily on the outlook.
In the absence of any fresh Eurozone data today the appeal of the Euro is unlikely to see any particular change.
Stronger Consumer Confidence Fails to Benefit US Dollar
A solid uptick in April’s consumer confidence index failed to shore up USD exchange rates overnight. Although the index strengthened from 124.1 to 129.2 this was not enough to bolster the appeal of the US Dollar, with the world’s largest economy continuing to show signs of weakness. April’s Chicago PMI offered fresh evidence of a slowing US economy, unexpectedly slipping closer to stagnant territory.
Any dip in tonight’s ISM manufacturing index may add to the bearish mood of USD exchange rates.
Economic Contraction Drags Canadian Dollar Down
February’s gross domestic product data failed to offer the Canadian Dollar a boost as growth was found to have contracted on the month. This disappointing showing left CAD exchange rates on the back foot as confidence in the outlook of the Canadian economy soured once again. With the economy struggling to find any degree of traction the Canadian Dollar was left to trend lower against its rivals.
Unless April’s manufacturing PMI shows increased growth on the month CAD exchange rates look set to remain biased to the downside today.
New Zealand Dollar Softens Ahead of Unemployment Data
The weak Chinese manufacturing data left the New Zealand Dollar under pressure yesterday as market risk appetite generally diminished. A modest improvement in April’s ANZ activity outlook index failed to shore up NZD exchange rates, with confidence in the underlying health of the New Zealand economy still limited. As business confidence remained firmly in the negative this also kept NZD exchange rates under pressure.
If the first quarter unemployment rate improves as forecast this morning, though, the New Zealand Dollar could rally sharply.

Data Releases

May 1st 08:30 AUD Manufacturing PMI (APR)
May 1st 08:45 NZD Unemployment Rate (1Q)
May 1st 18:30 GBP Manufacturing PMI (APR)
May 1st 23:30 CAD Manufacturing PMI (APR)
May 2nd 00:00 USD ISM Manufacturing (APR)

Post by TorFX

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