Underwhelming NZ Manufacturing PMI Drags Down New Zealand Dollar

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Headlines

  • AUD Exchange Rates Climbed Despite Surprise Chinese Trade Deficit – Global trade tensions continue to cast shadow over ‘Aussie’
  • Weaker Manufacturing PMI Dented New Zealand Dollar – Similarly disappointing services PMI could extend losses
  • Widened Eurozone Trade Surplus Failed to Encourage Euro – Investors discouraged by ECB concerns over EUR strength
  • US Dollar Muted After Softer University of Michigan Sentiment Index – High odds of Fed tightening limit USD exchange rate upside

Australian Dollar

Even though March’s raft of Chinese trade data proved rather mixed, with a sharp uptick in imports on the year prompting a surprise trade deficit, this ultimately had little impact on AUD exchange rates. A fresh warning over high levels of household debt in the latest Reserve Bank of Australia (RBA) also failed to weigh down the Australian Dollar ahead of the weekend. With market risk appetite picking back up amidst an easing in geopolitical tensions the appeal of the ‘Aussie’ improved.

However, given the unpredictability of US political policy the potential remains for fresh market jitters and Australian Dollar weakness.

Sterling

GBP exchange rates struggled to find any particular direction on Friday, lacking any domestic data to drive investor interest. With relatively high odds of an imminent Bank of England (BoE) interest rate hike already largely priced into the Pound there was limited scope for any major gains or losses. As Brexit-based jitters have also taken something of a backseat in recent days there was little cause for Sterling volatility.

As anticipation builds ahead of the latest UK wage growth and inflation data, though, the Pound looks vulnerable to increased pressure.

Euro

A moderate widening of the Eurozone trade surplus was not enough to boost the Euro during Friday’s European session. Even though the improved figure suggests an improvement in trade conditions markets remain sceptical over the strength of the domestic outlook. Confirmation that the German consumer price index had strengthened to 1.5% on the year in March also failed to shore up EUR exchange rates, with investors still discouraged by the dovishness of the latest European Central Bank (ECB) meeting minutes.

In the absence of any fresh data today the Euro looks set to remain on a generally softer footing.

US Dollar

As the University of Michigan sentiment index weakened further than forecast in April this left the US Dollar in a softer state. With domestic confidence continuing to ease this naturally exacerbated market worries over the outlook of the wider US economy. Given that the prospect of greater Federal Reserve hawkishness has already been largely priced into USD exchange rates, and with market risk appetite strengthening, investors saw little reason to favour the US Dollar ahead of the weekend.

With forecasts pointing towards a rebound in advance retail sales on the month USD exchange rates could find a fresh rallying point overnight.

Canadian Dollar

March’s existing home sales figure proved encouraging, although the 1.3% uptick was not enough to reverse the previous month’s -6.5% contraction. All in all, the health of the Canadian housing market still looks rather questionable. However, with Brent crude still trending comfortably above the US$72 per barrel mark the downside potential of CAD exchange rates was limited for the time being.

Even so, with global geopolitical tensions easing somewhat the potential for further oil market gains seems rather restricted, to the detriment of the Canadian Dollar.

New Zealand Dollar

Disappointment greeted the latest New Zealand manufacturing PMI, which dipped from 53.3 to 52.2 in March. This dampened confidence in the outlook of the domestic economy, suggesting that growth momentum remains rather lacklustre. Even the general improvement in market sentiment was not enough to offer NZD exchange rates a boost on Friday.

A similarly soft showing from today’s services PMI may see the New Zealand Dollar shedding further ground.

Data Released

April 16th 08:30 NZD Services PMI (MAR)
April 16th 08:45 NZD Food Price Index (MoM) (MAR)
April 16th 22:30 USD Advance Retail Sales (MoM) (MAR) 0.4%

Post by TorFX

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