- Unexpectedly Strong First Quarter Australian Gross Domestic Product Boosted AUD – Bullish data unlikely to alter RBA outlook
- Euro Pushed Higher by Hawkish ECB Comments – Chief economist suggests imminent discussion of QE tapering
- Narrowed Trade Deficit Failed to Shore up US Dollar – Upside limited after recent bullish run
- CAD Fell Out of Favour With Building Permit Contraction – Oil prices remain under pressure thanks to rising US stockpiles
AUD exchange rates pushed sharply higher on Wednesday in the wake of a better-than-expected first quarter Australian gross domestic product reading. Markets were pleasantly surprised to find that economic growth had accelerated to a bullish 3.1% on the year, improving confidence in the domestic outlook. This encouraged the Australian Dollar to rally sharply across the board, even though the data is unlikely to alter the Reserve Bank of Australia’s (RBA) policy outlook.
With forecasts pointing towards a narrowing of April’s Australian trade surplus, however, AUD exchange rates could struggle to hold onto their gains for long.
Demand for the Pound generally eased yesterday in the absence of any fresh UK data, with the positive impact of May’s stronger services PMI fading. Worries remain over the outlook of the domestic economy, given the significant degree of Brexit-based uncertainty that continues to hang over the UK. With markets continuing to debate the odds of the Bank of England (BoE) raising interest rates in August support for GBP exchange rates was somewhat limited.
Unless BoE policymakers show signs of adopting a more optimistic view on monetary policy the appeal of the Pound is unlikely to pick up.
The latest raft of Eurozone retail PMIs proved encouraging, offering investors cause for confidence in the single currency. With the retail sector recovering momentum EUR exchange rates returned to a stronger footing during Wednesday’s European session. Comments from European Central Bank (ECB) chief economist Peter Praet boosted the Euro further as he proved a little more hawkish in tone. As Praet indicated that the governing council will discuss tapering its asset purchase program at its June meeting markets reacted positively.
An uptick in German factory orders on the month could offer additional support to the Euro this afternoon.
A surprise narrowing of the US trade deficit was not enough to shore up the US Dollar overnight, even though this bodes well for the domestic outlook. After a solid bullish run the upside potential of USD exchange rates looks limited in the near term, even in the face of persistent global trade uncertainty. As a result the US Dollar was unable to find any fresh traction against its rivals at this juncture.
Any disappointment from tonight’s jobless claims figures may see USD exchange rates weaken further.
Investors were not impressed by a sharper-than-forecast contraction in April’s Canadian building permits figure, which slumped -4.6% on the month. This suggests that the domestic housing market is in a weaker state than previously thought, giving the Bank of Canada (BOC) more incentive to leave interest rates on hold. A surprise increase in US crude oil stockpiles put further pressure on the Canadian Dollar last night.
Ahead of tomorrow’s Canadian labour market data CAD exchange rates may struggle to find any measure of support.
New Zealand Dollar
Although the ANZ commodity price index showed a solid increase on the month the New Zealand Dollar failed to capitalise on this stronger reading. Demand for the ‘Kiwi’ remained generally limited thanks to lingering worries over rising global trade tensions and the underlying weakness of the domestic economy.
Risk aversion could keep the New Zealand Dollar on a weaker footing today as investors lack any fresh incentive to buy into the commodity-correlated currency.
June 7th 11:30 AUD Trade Balance (APR) 1,000 million
June 7th 16:00 EUR German Factory Orders (YoY) (APR) 3.6%
June 7th 22:30 USD Initial Jobless Claims (JUN 2) 225,000
Post by TorFX