Headlines
Pound Static before UK Growth Data –
Slowing GDP expected
US Dollar Drops after Services PMI –
Index declines by more-than-expected
Australian Dollar Trends Lower before RBA Comments –
Stevens May Discuss Rate Cuts
Canadian Dollar Stronger –
Data in Short Supply
Sterling
Although the Pound declined against several of its peers following the release of below forecast reports from the Confederation of British Industry (CBI), the currency returned to trending in the region of 1.40 against the Euro before the close of trading. The GBP/USD exchange rate also pushed to a high of 1.5261 following the publication of the US Services PMI.
In the hours ahead the Pound is likely to experience volatility in response to the release of UK first quarter growth data. Economists are envisaging the rate of expansion slowing from 0.6% to 0.5% in the first three months of the year.
If this estimation proves accurate Sterling may soften. Additionally, if GDP comes in below the forecast level it would increase uncertainty in the run up to the UK general election and put the Pound under further pressure.
Euro
Economic reports for the Eurozone are in short supply today so demand for the common currency will continue to be driven by any developments in the situation between Greece and its creditors.
Although European Central Bank Vice President Vitor Constancio expressed confidence in Greece’s ability to reach an accord and receive the funding it so desperately needs, other industry experts are less optimistic. It was also announced that Greek Finance Minister Yanis Varoufakis has been replaced as the leader of the debt discussions.
On Monday the Euro failed to derive much benefit from Germany’s stronger-than-forecast Import Price Index, but Wednesday’s GfK Consumer Confidence report for the Eurozone’s largest economy may lend the common currency support if it shows improvement.
US Dollar
The US Dollar posted broad-based declines during the North American session as investors reacted to the US Services PMI.
The measure of the US services sector had been expected to ease from 59.2 to 58.8 but actually fell to 57.8 – upping the odds of the Federal Reserve adopting a dovish tone during this week’s policy statement. The decline in the services index, coupled with the drop in its manufacturing counterpart, pushed the composite measure from 59.2 to 57.4.
The ‘Greenback’s downtrend against peers like the Pound was exacerbated by the US Dallas Fed Manufacturing Activity figure, which printed at -16.0 instead of the -12.0 anticipated.
Today the US Consumer Confidence Index will be the main cause of US Dollar movement. Another negative print may see the currency extend losses.
Canadian Dollar
With the price of Canada’s main commodity, crude oil, advancing to a four-month high, the Canadian Dollar was able to gain on a number of its major rivals at the start of the week.
Brent crude oil achieved 65.37 Dollars per barrel and saw the ‘Loonie’ advance on both the US Dollar and Pound.
However, the commodity-driven currency has since pared some of these gains. Canadian data is in short supply until Wednesday, when the nation will release Industrial Product Price and Raw Materials Price indexes, so further movement in the asset is likely to be the result of global economic developments and fluctuations in oil prices.
Australian Dollar
Recovering iron ore prices helped the Australian Dollar advance above the 78 cents level against the US Dollar and the South Pacific asset was able to approach 79 cents as investors reacted to the latest batch of less-than-impressive economic reports for the US.
The ‘Aussie’ held gains following a speech given by Reserve Bank of Australia (RBA) Governor Glenn Stevens.
Some economists had been concerned that Stevens would hint at the possible introduction of another rate cut. However, the central bank chief instead dwelt on the ‘tough choices’ retirees face in a low yielding financial environment.
Australia’s conference board leading index also showed a 0.5% increase in February, up from the 0.4% gain recorded in January.
Although demand for higher-yielding currencies increased as a result of US data weighing on Federal Reserve interest rate hike bets, the New Zealand Dollar extended declines against its Australian counterpart as a result of rising iron ore prices.
The ‘Kiwi’ dropped to a low of 96.76 Australian cents ahead of the release of domestic trade balance data. New Zealand’s trade surplus is expected to widen and if that proves to be the case it could lend the New Zealand Dollar support.
Data Released Today
09:30 UK Q1 GDP QoQ 0.5%
09:30 UK Q1 GDP YoY 2.6%
15:00 US Consumer Confidence 102.5