US Dollar Stalls on Fears of Possible US Recession

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  • Worries Over Global Outlook Drag Australian Dollar Down – Diminished market risk appetite pushes AUD exchange rates lower
  • Pound Remains Under Pressure from Brexit Uncertainty – European Commission highlights rising odds of no-deal Brexit
  • Euro Struggles to Capitalise on Improved German Business Sentiment – Weak manufacturing sector continues to weigh on outlook
  • Fears of Potential US Recession Send US Dollar into Slide – Investors wary as domestic data remains lacklustre

Slowing Global Growth Weighs on Australian Dollar

Increasing concerns over the global growth outlook kept the Australian Dollar under pressure yesterday, with investors spooked by the growing evidence of an economic slowdown. This weighed heavily on the risk-sensitive antipodean currency as investors piled into safe-haven assets, reflecting the general decline in global stock markets. With markets seeing an increasing risk of the Reserve Bank of Australia (RBA) cutting interest rates AUD exchange rates were left on the back foot.

An uptick in the latest ANZ weekly consumer confidence index could help to limit the weakness of the Australian Dollar this morning, though.

Brexit Tensions Keep Pound on Back Foot

Brexit-based anxiety limited the appeal of the Pound at the start of the week, with Theresa May still appearing to lack support for her proposed deal. With the longer extension of the Brexit deadline contingent on the deal successfully passing a parliamentary vote this left investors with little incentive to buy into the Pound. As the European Commission warned that the odds of a no-deal Brexit have increased this added to the pressure on GBP exchange rates.

With the latest mortgage approvals figure forecast to show a slowdown on the month the mood towards the Pound could sour further today.

Improved German Business Sentiment Offers Limited Euro Boost

March’s German IFO business sentiment index offered the Euro a boost, with the expectations index strengthening from 93.8 to 95.6. This suggests that confidence within the Eurozone’s powerhouse economy is picking up once again, undoing some of the damage of Friday’s disappointing manufacturing PMI. However, as the survey still highlighted a sense of unease within the manufacturing sector EUR exchange rates struggled to significantly benefit from the improvement in the headline index.

Unless the latest German GfK consumer confidence index picks up on the month the Euro looks likely to return to a weaker footing.

Underwhelming Fed Indexes Dent US Dollar Demand

As the Dallas Fed national activity index weakened further than forecast in March this left the US Dollar under pressure last night. This decline raised fresh questions over the underlying strength of the US economy, especially as the latest yield curve on government bonds fell sharply. Although the Chicago Fed national activity index only showed a slight decline on the month this was not enough to shore up USD exchange rates.

A stronger showing from the US consumer confidence index could offer the US Dollar a rallying point, provided market worries over the threat of a potential recession ease.

Risk Aversion Weighs Down Canadian Dollar

The Canadian Dollar remained out of favour with investors at the start of the week, with a lack of fresh domestic data limiting the potential for a rally. With concerns over the health of the global economy mounting the risk-sensitive Canadian Dollar weakened as oil prices also came under pressure. With the Bank of Canada (BOC) looking set to leave interest rates on hold for the foreseeable future CAD exchange rates were left with little in the way of support.

Until market risk appetite improves the Canadian Dollar could remain biased to the downside.

New Zealand Dollar Strengthens Ahead of Trade Data

Although demand for risk-sensitive assets diminished yesterday this was not enough to prevent the New Zealand Dollar gaining ground. NZD exchange rates capitalised on the relative weakness of the US Dollar and diminished odds of a Federal Reserve interest rate, pushing higher across the board overnight. The New Zealand Dollar also benefitted from the weakness of its commodity-correlated cousins.

If February’s trade data shows a narrowing of the deficit this may encourage the New Zealand Dollar to extend its gains further this morning.

Data Releases

March 26th 08:45    NZD    Trade Balance (FEB)    -200 million
March 26th 09:30    AUD    ANZ Roy Morgan Weekly Consumer Confidence Index    
March 26th 18:45    EUR    German GfK Consumer Confidence Index (APR)    10.8
March 26th 22:00    GBP    BBA Loans for House Purchase (FEB)    39,600
March 27th 01:00    USD    Consumer Confidence Index (MAR)    132.0

Post by TorFX

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