Pound Sterling (GBP) Exchange Rate Remains Soft as Brexit Debate Dominates
A higher-than-expected UK public sector net borrowing figure helped to push the Pound down further last week, as Chancellor George Osborne looked to be in real danger of breaching his own borrowing target for the 2015-2016 financial year. However, as February’s Retail Sales data was found to have suffered a smaller dip in growth than forecast, Sterling began to recover some ground ahead of the bank holiday weekend. With ‘Brexit’ debate expected to continue weighing on the currency in the coming week and consumer confidence expected to drop into negative territory, these gains may still prove short-lived.
Euro (EUR) Exchange Rate Looks to Rally on German Inflation Data
German consumer confidence for April failed to hold steady, dropping from 9.5 to 9.4 as optimism within the Eurozone’s powerhouse economy continued to retreat. With increasing uncertainty over the policy outlook of both the European Central Bank (ECB) and Federal Open Market Committee (FOMC) the Euro has nevertheless been shored up by market risk aversion. Additional Euro volatility should be expected in the week ahead, with the single currency likely to enter a bullish run if the latest German Consumer Price Index demonstrates an increase in inflationary pressure, however minor.
US Dollar (USD) Conversion Rate Trends Lower ahead of Yellen Speech
While February’s Durable Goods Orders failed to contract quite as far as forecast, the drop in demand helped to drag down the US Dollar ahead of the Easter bank holidays. This was somewhat countered by a stronger fourth quarter GDP, with the low trading volumes of Friday and Monday offering the ‘Greenback’ some additional support. Investors have been taking a less optimistic view of a potential April rate hike from the Fed in advance of comments from Fed Chair Janet Yellen, with any reiteration of dovishness expected to weaken the US Dollar further.
Australian Dollar (AUD) Exchange Rate Weighed Down by Fed Speculation
The weakening of the US Dollar has been of strong benefit to the ‘Aussie’, although markets have remained in a fairly volatile state towards the end of March. With the Fed appearing to increasingly lean towards monetary tightening. the Reserve Bank of Australia (RBA) may come under further pressure to ease. Markets have also taken some note of RBA Governor Glenn Stevens’ expressed concern over the relative strength of the Australian Dollar, helping to drive the currency down as commodity prices enter a fresh slump.
New Zealand Dollar (NZD) Shored up by Widened Trade Surplus
In some much-needed positivity for the New Zealand economy, February’s raft of trade data bettered expectations, increasing confidence in the ‘Kiwi’. The national trade surplus proved decidedly larger than forecast, bolstered by a sharp rise in exports. This helped to offset the negative impact of increasingly dismal signs from the domestic dairy trade, encouraging speculation that the Reserve Bank of New Zealand (RBNZ) will hold its nerve next month.
Canadian Dollar (CAD) Exchange Rate Wavers after Mixed Budget Reception
Oil has failed to maintain its recent upwards momentum, as higher-than-expected US inventories reignited market concerns over persistent global oversupply. The appeal of the Canadian Dollar fluctuated somewhat in the aftermath of the latest federal budget, which pledged a comprehensive raft of reforms and increased spending on infrastructure at the expense of widening the national deficit. While traders were initially encouraged by this optimistic proposal the mood has since soured, with doubts remaining over the prospects of the Canadian economy.