US Dollar Supported by Payrolls Surge

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  • Improved Construction PMI Offers Limited AUD Exchange Rate Support – Australian Dollar vulnerable to softening risk appetite
  • Talk of Potential Brexit Deadline Extension Eases Pound Downside – Political developments continue to dominate GBP outlook
  • German Industrial Production Rebound Benefits Euro – Worries over Eurozone economic outlook remain
  • Stronger US Payrolls Encourage US Dollar Exchange Rates – Surprise wage growth dip limits USD boost

 Construction PMI Improvement Fails to Encourage Australian Dollar
The Australian construction PMI saw a modest improvement on the month in March, strengthening from 43.8 to 45.6. However, as this left the index within a state of contraction the positive impact on AUD exchange rates proved limited. As anticipation mounted ahead of the latest US payrolls report the Australian Dollar struggled to find traction against its rivals. The better-than-expected rebound in US employment left AUD exchange rates on a weaker footing heading into the weekend, even though worries over the health of the world’s largest economy remain.
Any deterioration in market risk appetite could put further pressure on the Australian Dollar today.
 Hopes of Brexit Deadline Extension Limit Pound Weakness
Although Theresa May requested a fresh Brexit deadline extension from EU leaders this failed to give the Pound any significant boost on Friday. Reports that European Council President Donald Tusk would be willing to offer the UK a so-called ‘flexible extension’ still helped to limit the downside potential of GBP exchange rates, however. As the Halifax house price index showed a fresh contraction in March this dented confidence in the health of the UK economy.
Brexit developments look set to remain the primary driving force for GBP exchange rates in the near term.
 German Industrial Production Rebound Boosts Euro
Investors took encouragement from February’s German industrial production data, which showed modest growth of 0.7% on the month. This positive showing helped to diminish the impact of the previous day’s sharp decline in factory orders, suggesting that the German manufacturing sector is in a better state of health than previously thought. However, as the underlying signs still point towards weakness within the Eurozone’s powerhouse economy EUR exchange rates struggled to capitalise on the data.
As forecasts point towards a widening of the German trade surplus this could offer the Euro a solid rallying point this afternoon.
 Stronger Payrolls Headline Encourages US Dollar Gains
March’s headline non-farm payrolls figure bettered expectations ahead of the weekend as 196,000 new jobs were added to the US economy. However, while this went some way to reversing the labour market slowdown seen in February this was not enough to prompt a strong US Dollar rally. Investors were instead concerned by a surprise loss of momentum in average weekly earnings, with wage growth remaining a key indicator for Federal Reserve policymakers. As a result, USD exchange rates saw only limited gains on Friday.
In the absence of any fresh data the US Dollar could come under pressure today if market risk appetite picks up once again.
Employment Dip Weighs on Canadian Dollar
Demand for the Canadian Dollar faltered as March’s net change in employment proved negative. As both full and part time jobs saw a decline on the month investors were left with little cause for confidence in the Canadian labour market. Even so, the downside pressure on CAD exchange rates was limited thanks to an unexpected uptick in wage growth.
A rebound in building permits after January’s contraction should offer the Canadian Dollar a fresh boost tonight.
Lack of Market Risk Appetite Limits New Zealand Dollar
In the absence of any fresh developments in the US-China trade talks the mood towards the risk-sensitive New Zealand Dollar soured on Friday. Markets saw little reason to favour NZD exchange rates as the impact of earlier market optimism faded. The stronger US payrolls data also put a dampener on the New Zealand Dollar ahead of the weekend.
With domestic data still lacking today the mood of NZD exchange rates is likely to remain bearish.

Data Releases

April 8th 17:00    EUR    German Trade Balance (FEB)    16.5 billion
April 8th 23:30    CAD    Building Permits (MoM) (FEB)    0.2%

Post by TorFX

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