Unsurprising ECB Meeting Leaves Euro on Bearish Trend

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Headlines

  • AUD Exchange Rates Muted Despite Improved Australian Terms of Trade – Stronger producer price index may encourage demand
  • ECB Left Monetary Policy on Hold Once Again – Euro trended lower as central bank shows no signs of increased hawkishness
  • Sterling Recovered Ground After Better-Than-Forecast Mortgage Figure – Losses likely on weaker GDP data
  • Widened NZ Trade Surplus Could Boost New Zealand Dollar Demand – ‘Kiwi’ remains vulnerable to risk aversion

Australian Dollar
 
An improvement in the first quarter Australian terms of trade failed to boost confidence in the Australian Dollar yesterday. Although both import and export prices picked up sharply on the quarter this was not enough to encourage any fresh optimism in the domestic outlook. Solid US data put further downside pressure on AUD exchange rates, meanwhile, with the appeal of commodity-correlated currencies remaining generally muted.
 
A similar improvement in the first quarter producer price index could limit the losses of the Australian Dollar today, however.
 
Sterling
 
GBP exchange rates returned to a stronger footing during Thursday’s European session, even though the UK housing market still demonstrated signs of slowing. While the BBA loans for house purchase figure proved better than forecast it still showed a decline on the month. Even so, Sterling was able to push higher across the board overnight as anticipation mounted for the latest parliamentary vote on whether the UK should remain within the customs union after Brexit.
 
If the first quarter UK gross domestic product is revised lower on the quarter, in line with forecasts, this could see the Pound slump ahead of the weekend.
 
Euro

April’s European Central Bank (ECB) policy meeting yielded nothing in the way of surprises, leaving the Euro under pressure. With the central bank looking set to leave its quantitative easing programme in place for some time to come investors saw little reason to favour the single currency. While ECB President Mario Draghi downplayed the impact of recent negative Eurozone data this was not enough to shore up EUR exchange rates.
 
With little change forecast for the latest German unemployment data the Euro may struggle to find any particular support tonight.
 
US Dollar
 
The US Dollar lost some of its bullishness overnight as the latest raft of domestic data proved a little mixed in nature. Even so, USD exchange rates continued to trend positively on the back of a better-than-expected narrowing of the advance goods trade deficit in March. Coupled with solid durable goods orders and a further drop in jobless claims this boosted confidence in the underlying health of the world’s largest economy.
 
As the annualised US gross domestic product is forecast to have dipped from 2.9% to 2.0% on the quarter the US Dollar could come under further pressure tonight.
 
Canadian Dollar
 
Although Bank of Canada (BOC) Governor Stephen Poloz maintained a cautiously optimistic outlook on the Canadian economy this failed to particularly encourage CAD exchange rates. With the central bank not expected to return to a monetary tightening bias for some time to come, though, investors took little heed of Poloz’s comments. Even with the oil market remaining in a positive mood the Canadian Dollar struggled to find any fresh upside potential.
 
Unless oil prices push significantly higher ahead of the weekend CAD exchange rates are likely to see limited gains today.
 
New Zealand Dollar
 
With market risk appetite still largely diminished the New Zealand Dollar struggled to find any significant support yesterday. However, as forecasts point towards a widening of the New Zealand trade surplus in March the weakness of NZD exchange rates was somewhat limited.
 
Any disappointment from today’s trade data, however, is expected to set the New Zealand Dollar on a fresh downtrend across the board.

Data Released

April 27th 08:45    NZD    Trade Balance (MAR)    275 million
April 27th 11:30    AUD    Producer Price Index (YoY) (1Q)    
April 27th 17:55    EUR    German Unemployment Rate (APR)     5.3%
April 27th 18:30    GBP    Gross Domestic Product (QoQ) (1Q)    0.3%
April 27th 22:30    USD    Gross Domestic Product Annualised (QoQ) (1Q)    2.0%

Post by TorFX

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