US Dollar Returns to Downtrend on Weak Production Data

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  • Australian Dollar Under Pressure as US-China Trade Summit Delayed – Global growth worries limit AUD exchange rate upside
  • Consumer Sentiment Rebound Fails to Benefit US Dollar – Weak manufacturing and production data weigh on USD
  • Pound Loses Uptrend in spite of Brexit Deadline Extension Vote – Uncertainty over UK’s political and economic future persists
  • House Sales Slump Drags Canadian Dollar Down – Investors unimpressed by latest signs of weakening Canadian economy

Delay to US-China Trade Talks Weighs on Australian Dollar

News that US and Chinese officials are now targeting April, or possibly later, for a trade summit left the Australian Dollar under pressure. With the US-China trade spat set to persist for longer market risk appetite diminished, leaving AUD exchange rates on a weaker footing. However, as US production data fell short of forecast during Friday’s European session this helped to shore up the Australian Dollar.

As long as worries over the global economy and trade outlook persist this is likely to limit the potential for AUD exchange rate gains.

Pound Falters in spite of Brexit Deadline Extension

Although MPs voted in favour of an extension to the Brexit deadline this failed to give the Pound any fresh boost. As a sense of Brexit-based uncertainty looks set to persist for longer investors saw limited incentive to buy into Sterling ahead of the weekend. With Theresa May preparing to bring her rejected Brexit deal before Parliament once again, for a third ‘meaningful vote’, the mood of GBP exchange rates soured.

If the Rightmove house price index points towards a continued slowdown within the UK housing market this could put additional pressure on the Pound.

Steady Eurozone Inflation Boosts Euro

As February’s finalised Eurozone consumer price index avoided a downward revision this encouraged EUR exchange rates to gain ground. Investors also greeted better-than-expected German wholesale price index figures, even though the monthly reading failed to entirely reverse January’s contraction. With signs pointing towards stronger underlying inflationary pressure within the Eurozone’s powerhouse economy the mood towards the Euro naturally improved.

However, the single currency looks vulnerable today as forecasts point towards the Eurozone trade balance falling into a state of deficit in January.

Stronger Consumer Sentiment Not Enough to Prevent US Dollar Losses

Although the University of Michigan consumer sentiment index bettered forecasts, strengthening from 93.8 to 97.8 in March, this was not enough to prevent the US Dollar weakening. This positive data was overshadowed by a disappointing Empire manufacturing index and industrial production figures. As the US manufacturing sector showed further signs of slowing this left USD exchange rates under pressure, with confidence in the economic outlook already limited.

An improvement in March’s NAHB housing market index may encourage the US Dollar to return to a stronger footing tonight, however.

Canadian Dollar Slumps as Home Sales Drop

Demand for the Canadian Dollar diminished heading into the weekend as February’s existing home sales data disappointed. As sales saw a sharp -9.1% decline on the month this raised fresh concerns over the health of the Canadian housing market, as well as the wider economy. This weaker showing increased the odds of the Bank of Canada (BOC) maintaining a dovish policy outlook for longer, driving CAD exchange rates lower across the board.

Unless the oil market shows signs of bullishness today the Canadian Dollar may struggle to regain its lost ground.

Solid Manufacturing PMI Fails to Prevent New Zealand Dollar Weakness

A modest uptick in February’s manufacturing PMI was not enough to prevent the New Zealand Dollar losing ground on Friday. With market risk appetite generally limited NZD exchange rates struggled to find support, even though the manufacturing data showed solid sector growth. The relative weakness of the US Dollar soon helped the New Zealand Dollar to gain some ground, however.

If the corresponding services PMI remains firmly in expansion territory, though, this could help to boost NZD exchange rates this morning.

Data Releases

March 18th 08:30    NZD    Services PMI (FEB)    56.1
March 18th 11:01    GBP    Rightmove House Price Index (YoY) (MAR)    
March 18th 21:00    EUR    Eurozone Trade Balance (JAN)    -8 billion
March 19th 01:00    USD    NAHB Housing Market Index (MAR)    63

Post by TorFX

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