Pound Sterling (GBP) Exchange Rate Out of Favour on Growth Worries
Confidence in the Pound has not especially improved this week, as concerns over the future of the UK steel industry cloud the outlook of the domestic economy. Investors also remain worried about the potential fallout of a vote to leave the EU, with polls indicating that the lead of the ‘Remain’ camp could be narrowing. Despite both the Construction and Services PMIs bettering expectations in March, this has not been enough to shore up demand for Sterling. Friday’s trade balance data could offer a rallying point, however, if the UK’s trade deficit is found to have narrowed in February.
Euro (EUR) Exchange Rate Benefits from Safe-Haven Demand
Lenders returned to Greece on Monday with an aim to progressing reforms and the country’s bailout, a prospect which nevertheless failed to encourage any particular Euro strength. Weaker Eurozone Producer Price Index figures indicated that the European Central Bank (ECB) still has a long way to go before inflation begins to rise as policymakers desire. It would seem that further monetary loosening may well be in order after the finalised raft of March Services PMIs were revised downwards, although the single currency has since been boosted by safe-haven demand.
US Dollar (USD) Conversion Rate Regains Ground despite Fed Dovishness
While comments from Fed Chair Janet Yellen had served to reduce talk of an imminent interest rate hike and dampened the appeal of the ‘Greenback’ this ultimately did not last long. A stronger-than-expected Non-Farm Payrolls report encouraged a return to US Dollar bullishness ahead of the weekend, as jobs and wage growth remained robust. With safe-haven demand on the rise in the wake of the Panama Papers data leak the US Dollar has also been spurred higher by a surge in the ISM Non-Manufacturing Composite Index.
Australian Dollar (AUD) Exchange Rate Softens after RBA Rate Hold
Markets were not surprised that the Reserve Bank of Australia (RBA) chose to leave interest rates on hold at the April policy meeting. Despite Governor Glenn Stevens not engaging in any particular jawboning, and the implication that the central bank remains reluctant to cut rates, markets were inclined to react bearishly. Demand for the ‘Aussie’ was also driven down by an unexpected widening of the Australian trade deficit and a disappointing domestic Services PMI.
New Zealand Dollar (NZD) Recovers on Dairy Surge
Accusations that New Zealand had functioned as a soft tax haven for a number of high-level political figures prompted a sharp move away from the ‘Kiwi’ at the start of the week. With business confidence sinking the appeal of the New Zealand Dollar was greatly muted, despite having climbed strongly on the back of Friday’s improved Chinese Manufacturing PMI. Investors were offered some encouragement, however, after the GlobalDairyTrade auction revealed an increase in dairy prices.
Canadian Dollar (CAD) Exchange Rate Dips with Oil Price Reversal
In spite of the latest US crude inventories demonstrating a larger drop-off than markets had anticipated this was not enough to maintain the general positivity of recent weeks. Investors are increasingly sceptical that an upcoming meeting of oil producers will result in any concrete action, with this loss of optimism resulting in Brent crude sinking below $38 per barrel. This latest slump has overshadowed a bullish Canadian GDP and improved Manufacturing PMI, as the Canadian Dollar remains primarily linked to the outlook of oil.