US Dollar Bullishness Punctured by Weaker Wage Growth

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Headlines

  • US Tariffs Failed to Keep Australian Dollar on Weaker Footing – Softening card purchases may dent confidence
  • Pound Shrugged Off Weaker-Than-Forecast UK GDP Estimate – Signs still point towards further loss of economic momentum
  • Disappointing Wage Growth Returned US Dollar to Downtrend – Fed policymakers may be deterred by weaker earnings data
  • Underwhelming German Trade Figures Weighed Down EUR Exchange Rates – Investors discouraged as export volumes contracted

Australian Dollar

Even though the Trump administration pushed ahead with its steep tariffs on steel and aluminium this failed to keep the Australian Dollar on a weaker footing on Friday. This was partly due to the fact that investors had already largely discounted this news, reducing the scope for AUD exchange rate weakness. The disappointing nature of the latest US wage growth data also helped to support the antipodean currency, encouraging increased risk appetite.

An uptick in January’s credit card purchases data could offer further support to the Australian Dollar today.

Sterling

Friday’s raft of UK data proved rather mixed in nature, although the Pound was still able to recover some ground against the majors in spite of this. Markets were quick to shrug off the disappointing nature of the NIESR gross domestic product estimate for the three months to February, even though the think-tank forecast a further slowdown of growth in March. A temporary easing in Brexit-based tensions, in the absence of any fresh comments, offered Sterling something of a reprieve.

However, worries over the future trade relationship between the UK and EU are still likely to dominate the outlook of GBP exchange rate this week.

Euro

A surprise contraction in German exports in January weighed heavily on the appeal of the Euro, undermining confidence in the health of the Eurozone’s powerhouse economy. Even though this was coupled with a similar decline in import volumes the German trade surplus still narrowed on the month. All in all, this added to the dovish mood of investors in the wake of the European Central Bank (ECB) policy meeting, leaving EUR exchange rates on a weaker footing.

Developments surrounding the US tariffs and any retaliatory measures from the EU may keep the single currency under pressure in the near term.

US Dollar

February’s raft of US labour market data failed to paint the positive picture that markets had hoped for, with the unemployment rate holding steady at 4.1%. This suggests that a significant degree of slack still remains within the US economy, considering the sharp uptick in the headline payrolls figure. As average hourly earnings also proved weaker than forecast demand for the US Dollar faltered, given that Federal Reserve policymakers have expressed some misgivings over wage growth.

Trade war concerns could keep USD exchange rates in check today, with investors still concerned by the likely negative impact that tariffs will have on the domestic economy.

Canadian Dollar

While the Canadian unemployment rate showed a surprise improvement in February, dipping from 5.9% to 5.8%, this was not enough to significantly bolster CAD exchange rates. Demand for the Canadian Dollar remained somewhat limited thanks to ongoing concerns over trade, and the impact of a more protectionist US on the Canadian economy.

Unless markets see signs that the future of NAFTA is positive the appeal of the Canadian Dollar is unlikely to see any drastic turnaround.

New Zealand Dollar

In a less positive sign for the New Zealand economy, February’s retail card spending saw an unexpected contraction on the month. This suggests that consumer confidence is still rather weaker than markets would like, something which is likely to give the Reserve Bank of New Zealand (RBNZ) further incentive to leave policy on hold. However, a weaker US Dollar helped to limit the bearishness of the ‘Kiwi’ somewhat ahead of the weekend.

If tomorrow’s food price index figure offers further signs of weakening inflationary pressure, though, NZD exchange rates are expected to soften.

Data Released

March 12th 10:30 AUD Credit Card Purchases (JAN)

Post by TorFX

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