Pound Sterling (GBP) Exchange Rate Bolstered by Improved UK CPI
Despite poor UK industrial and manufacturing production figures the Pound began to regain ground against rivals ahead of the weekend. Consolidative trading pushed the currency higher as markets reassessed the recent weakness of Sterling. This more bullish outlook was helped by an agreement for Tata Steel to sell its Long Products Europe division to City investment firm Greybull Capital, securing more than 4,000 jobs in the process. Further upwards momentum was added to the Pound on Tuesday as the UK’s inflation rate was found to have edged higher from 0.3% to 0.5%, increasing hopes of a nearer term interest rate rise from the Bank of England (BoE). Some of these gains could be reversed, however, if policymakers take a particularly dovish tone at this week’s policy meeting.
Euro (EUR) Exchange Rate Trends Lower on Renewed Greek Worries
Greece has been dragging on sentiment towards the Euro once again, after a particularly sharp contraction in the Greek inflation rate raised concerns over the outlook of the domestic economy. While creditors are reported to have made progress in discussions over the closing of the Hellenic nation’s first bailout review these talks had to be put on hold for the IMF’s spring meetings. Thus, in spite of stronger German inflation, worries continue to weigh on the single currency. Later in the week the Eurozone Consumer Price Index report could dent the Euro further, as generally weaker inflationary pressure increases the motivation for the European Central Bank (ECB) to loosen monetary policy further.
US Dollar (USD) Conversion Rate Pulled Down by Fed Commentary
While it seems that hawkish dissent is increasing amongst members of the Federal Open Market Committee (FOMC), this has not been enough to support the US Dollar. The rampant strength of the Japanese Yen has dented demand for the ‘Greenback’ this week, particularly as the odds of an imminent Fed rate hike appear to be reduced. As Fed Chair Janet Yellen and other policymakers maintain the view that patience is required with regards to future interest rate hikes the US Dollar has trended lower. However, if domestic data continues to offer reassurance in the strength of the domestic economy the Dollar could see some renewed strength.
Australian Dollar (AUD) Exchange Rate Strengthens after NAB Confidence Data
A stronger-than-expected NAB Business Confidence Index boosted the ‘Aussie’ this week, as sentiment was found to have improved from 3 to 6 in March. This suggested that the Australian economy is in a more robust state, fostering a bullish mood on markets and bolstering demand for the higher-yielding antipodean currency. US Dollar weakness has also been benefitting the Australian Dollar in recent days, as the lowering odds of an imminent Fed hike alleviate pressure on the Reserve Bank of Australia (RBA). Should Thursday’s raft of Australian employment data prove disappointing, though, this strong run could be brought to an end.
New Zealand Dollar (NZD) Boosted by Market Risk Appetite
Following a modest uptick in dairy prices the New Zealand Dollar has been on mixed form against the majors, being driven primarily by market sentiment due to a relative lack of domestic data. While weaker retail spending somewhat hampered the ‘Kiwi’ on Monday the currency soon returned to an uptrend thanks to Fed dovishness and higher New Zealand house prices. In the coming week the New Zealand Dollar could see a greater return to bearishness if China’s first quarter GDP suggests that the world’s second largest economy is slowing, with the resultant decline in commodity prices expected to dent the ‘Kiwi’.
Canadian Dollar (CAD) Exchange Rate Surges on Higher Oil Price
Although market confidence has not been entirely in abundance over the last week the price of Brent crude has climbed back above the $43 per barrel mark, hitting its highest level since the start of 2016. This recovery remains based around hopes that the upcoming meeting of oil producers could lead to an output freeze, in spite of some doubts. The appeal of the ‘Loonie’ was also improved by stronger Canadian employment data, which demonstrated an unexpected dip in the Unemployment Rate from 7.3% to 7.1%. With the Bank of Canada (BOC) not expected to lower interest rates at its latest policy meeting the Canadian Dollar could make further gains in coming days.