- Weaker Inflation Estimate Weighed on AUD Exchange Rates – Markets brace for RBA meeting
- Euro Failed to Benefit From Stronger-Than-Forecast German Inflation – Confidence in Eurozone outlook remains limited
- ANZ Business Confidence Dipped Further – New Zealand Dollar under pressure from muted economic outlook
- Canadian Dollar Faltered on Rising US Oil Production – Gross domestic product rebound could shore up CAD rates
Demand for the Australian Dollar remained generally limited on Monday thanks to a dip in the headline TD Securities inflation estimate. While the monthly measure was more positive in nature this was not enough to boost AUD exchange rates at the start of the week, especially in the absence of any particular market risk appetite. An uptick in private sector credit also failed to benefit the ‘Aussie’, which remains weighed down the relative strength of the US Dollar.
AUD exchange rates could see further weakness today if the Reserve Bank of Australia (RBA) maintains a more dovish tone on the subject of monetary policy.
With confidence in the prospect of a May Bank of England (BoE) interest rate hike diminished the Pound has struggled to find any particular traction against its rivals. The latest UK political developments gave investors little cause for confidence, meanwhile, with a fresh shakeup at the Home Office. As the balance of Theresa May’s cabinet remains rather fragile this latest change exacerbated worries over Brexit and the unresolved issue of the Irish border.
If April’s UK manufacturing PMI shows a loss of momentum on the month this could add to the bearish mood of GBP exchange rates.
Although the German consumer price index defied forecasts to hold steady at 1.6% this failed to shore up the Euro at the start of the week. Markets remain concerned that underlying inflation within the Eurozone’s powerhouse economy is still rather lacklustre, with price pressures stagnating on the month. A surprise contraction in German retail sales on the month encouraged further selling of the single currency, especially as political concerns in Italy flared up once again.
In the absence of any domestic data today the Euro is likely to lack any particular support.
As March’s US personal consumption expenditure core headline figure strengthened in line with forecasts this offered fresh encouragement to USD exchange rates. With the Federal Reserve’s preferred measure of inflationary pressure pushing higher, accelerating to 1.9% on the year, this improves the case for more aggressive monetary tightening. Although the latest signs from the US housing market proved less positive this was not enough to knock the US Dollar off its bullish footing overnight.
With the ISM manufacturing index forecast to have softened on the month, though, the US Dollar could come under fresh pressure tonight.
A solid uptick in March’s industrial product prices offered support to Canadian Dollar exchange rates at the start of the week. Rising prices bode well for the domestic inflationary outlook, potentially giving the Bank of Canada (BOC) greater cause for confidence in the months ahead. However, the strength of the Canadian Dollar was tempered by a slight easing in oil prices as the US rig count continued to rise.
If February’s gross domestic product shows a rebound on the month this may give CAD exchange rates a stronger rallying point.
New Zealand Dollar
April’s ANZ business confidence index fell further into negative territory, dipping from -20 to -23.4. This weighed heavily on NZD exchange rates yesterday, adding to concerns that the New Zealand economy remains under pressure. With market anticipation building for the Federal Reserve’s May policy meeting the appeal of the risk-sensitive New Zealand Dollar naturally diminished.
Even a stronger showing from the latest building permits figure is unlikely to be enough to boost NZD exchange rates today.
May 1st 08:45 NZD Building Permits (MoM) (MAR)
May 1st 14:30 AUD Reserve Bank of Australia Rate Decision 1.50%
May 1st 18:30 GBP Manufacturing PMI (APR) 54.8
May 1st 22:30 CAD Gross Domestic Product (MoM) (FEB) 0.3%
May 2nd 00:00 USD ISM Manufacturing (APR) 58.5
Post by TorFX